LONDON (Alliance News) - International Consolidated Airline Group's EUR1.4 billion takeover bid for Aer Lingus got a boost Thursday, although it could also be delayed for a substantial amount of time, after the UK antitrust regulator made a final order that Ryanair Holdings sell down its stake in the Irish flag carrier.
The Competition and Markets Authority said Ryanair must now sell its 29.8% stake in Aer Lingus down to 5%, after deciding that IAG's bid for Aer Lingus hadn't changed the circumstances of its initial ruling that Ryanair must sell down the stake, as Rynair had argued.
The final ruling should mark the culmination of a two-year battle between the regulator and Ryanair, which built up its stake when it tried to acquire Aer Lingus itself. It was blocked by regulators and failed to get the acceptance of the Irish government, which has a 25% Aer Lingus stake. The Irish government has accepted IAG's offer for Aer Lingus.
However, the battle with the UK regulator has become a matter of pride for Ireland's Ryanair and its forthright Chief Executive Michael O'Leary, who said the airline will be appealing the CMA's "ridiculous" and "manifestly wrong" decision that "flies in the face" of the current IAG takeover offer for Aer Lingus. That appeal could delay the outcome of IAG's bid.
If Ryanair had been allowed license to decide the fate of its Aer Lingus stake itself, it could have used that as leverage to extract a higher offer from IAG, or to get concessions like landing and takeoff slots for Ryanair. However, the CMA's decision means it doesn't have that leverage as it has to sell the stake anyway.
O'Leary reiterated that Europe's largest low-cost airline would look at IAG's offer for Aer Lingus when it received the formal offer document, and conceded that the IAG offer was at a significant premium to the bids that Ryanair had made for Aer Lingus, but he said the battle with the CMA was a separate issue and one that he's determined to pursue.
Royal Mail is the biggest faller in the FTSE 100 after the UK government raised GBP750 million by selling a further 15% stake in Royal Mail for 550 pence a share, significantly more than it got per share when it first floated the mail operator in the criticized initial public offering nearly two years ago.
The Department for Business, Innovation & Skills had announced Wednesday that it would be selling half its remaining 30% stake in Royal Mail in an accelerated bookbuild. The sale means the UK government is left with 149.9 million Royal Mail shares, a 15% stake. Chancellor Osborne later said a 1% stake of the remaining 15% would be gifted to the company's staff. Staff took a 10% stake in the initial IPO.
The Royal Bank of Scotland, meanwhile, is amongst the best performers in the bluechip index, after Osborne also kicked off the return of the bank to the markets.
The government is to begin selling the UK's 80% stake in Royal Bank of Scotland Group after both the Bank of England and banking group Rothschild signalled that the time has come to initiate the lender's return to full private ownership.
Delivering his annual speech at Mansion House in London on Wednesday evening, Osborne said that kicking off the sale of the government's stake six years since completing the injection of GBP45.5 billion into the bank is the "right thing" to do.
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Markets: London share prices are higher with the Greek debt situation remaining in the background and as shares in Royal Mail and Royal Bank of Scotland Group experience different fortunes following UK government announcements about its holdings in the two companies.
Futures point to a flat to lower open for US stock indices, with the DJIA and Nasdaq 100 currently indicated flat and the S&P 500 down 0.1%.
FTSE 100: up 0.2% at 6,846.17
FTSE 250: up 0.4% at 18,106.73
AIM ALL-SHARE: up 0.3% at 775.87
GBP: down at USD1.5480
EUR: down at USD1.1265
GOLD: down at USD1,179.67 an ounce
OIL (Brent): down at USD64.92 a barrel
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Other Top Corporate News
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Chancellor George Osborne did not include explicit reference to the bank levy imposed on banks in 2011 in his Mansion House speech. The levy has been seen to have played a part in HSBC Holdings' decision to review whether to relocate its global headquarters from London, although the Chancellor said that making Britain the "best place" for the headquarters of European and global banks is in the national interest. The levy has been seen to disproportionately affect HSBC and fellow Asia-focused lender Standard Chartered as it is imposed on global, rather than just UK, balance sheets.
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Bank of England Governor Mark Carney said that all firms active in financial transaction markets, including dealers and asset managers, should ensure that senior managers are held directly accountable for failures in their areas of responsibility, and the core principles of the new regime governing this in banks and insurers will also apply to senior staff at the central bank. In his Mansion House speech, Carney said that from next year, senior managers of banks and insurers will be held directly accountable for failures in their areas of responsibility and this should be extended to all firms active in so-called Fixed Income Clearing Corporation markets, including dealers and asset managers.
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British American Tobacco said it has successfully priced a US dollar denominated issue of notes, raising proceeds of approximately USD4.5 billion that will be used to help fund its decision to maintain its stake in Reynolds American and could also be used to pay down debt. BAT said a year ago that it would invest USD4.7 billion to maintain its existing 42% interest in the enlarged Reynolds American group, following the acquisition of Lorillard by Reynolds in a deal valued at USD27.4 billion. Last month, the Reynolds-Lorillard deal was approved by the US Federal Trade Commission.
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GKN has won a long-term deal to supply aircraft parts to Boeing Co. The aerospace engineer said that it has been awarded a contract to supply inlet lip skins for the Boeing 737 MAX and 777X aircraft and to assemble section 47 floor grids for the 787 Dreamliner. In conjunction with the contract, GKN said it has bought Sheets Manufacturing Inc, a small, California-based and privately-owned metallic spin forming company that makes aircraft engine inlet lip skins and has legacy programme positions on the Boeing 747-8 and KC-46 tanker aircraft.
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Home Retail Group reported a drop in total sales in both its Argos and Homebase businesses in the first quarter of its financial year, but a rise in like-for-like sales in Homebase as it continues with its 'Transformation Plan' and store-closure programme. The owner of the Argos electronics and general merchandise chain and the Homebase DIY chain said that total sales in Argos declined 2.6% to GBP846 million in the 13 weeks to May 30, as like-for-like sales fell 3.9%. Total Homebase sales decreased 1.6% to GBP438 million, but like-for-like revenue was up 5.4% in the period.
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PZ Cussons said the group's performance in its recently-ended financial year was in line with expectations, as it did well in the UK, Australia and Indonesia, and as trading in Nigeria is stabilising. The maker of bath products Imperial Leather and Original Source said that in the year to May 31, all brands performed well in the UK driven by a significant renovation and innovation programme, while performance in the smaller markets of Poland and Greece was in line with expectations.
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Ophir Energy saw its shares rise after it said a new independent reserves report had confirmed its has over 1 billion barrels of oil equivalent in its reserves, which it claimed is one of the largest in the European mid-cap sector. The independent reserves and resources reports support its previous management estimates, the company said, with combined net 2P and 2C resources as at the end of 2014 at over 1 billion barrels of oil equivalent. This is split between certified net proven and probable reserves, its 2P reserves, of 59.6 million barrels of oil equivalent, and certified best estimate of contingent resources, its 2C reserves, of 950.0 million barrels of oil equivalent.
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WS Atkins said its outlook remains positive despite challenging markets that are being affected by low oil prices and economic and political uncertainty, after it reported higher underlying profits for its last financial year. The project designer, engineer and management consultancy reported a pretax profit of GBP106.7 million for the year to end-March, down from GBP114.2 million a year earlier.
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Petrofac said said it has been awarded an engineering and procurement contract, expected to be worth about USD900 million, by Petroleum Development Oman to provide services for its Yibal Khuff project, a field located approximately 350 kilmetres south west of Muscat in the Sultanate of Oman.
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AIM Movers
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Avesco Group shares have risen by more than a quarter after it swung to a profit in the first half of its financial year, driven by its Creative Technology business, and said the outlook for the second half is just as encouraging, meaning its full year results are again likely to exceed its previous expectations. Sefton Resources is doing well after its application to move the Colorado court case brought against the company by former Executive Chairman Jim Ellerton to the Federal Court from the state District Court was approved. Sefton also said the three-year equity finance facility provided by Darwin Strategic Ltd, which was agreed in principal back in 2012, has been finalised. Versarien is up after it said its graphene development subsidiary 2-DTech has made a "major advance" in graphene platelet production, which it believes will accelerate the potential commercial applications for graphene and graphene products. Red24 is another gainer after it won a deal to provide Allianz Global Corporate & Specialty, the corporate insurer of Allianz Group, with crisis management services. First Property Group is up after it reported strong increases in assets, earnings and returns due to a strong performance from its fund management business and the purchase of properties in Poland and Romania for its group properties portfolio. Nektan is up after it received approval for both a software and gaming licence for the UK market from the UK Gambling Commission. Sirius Minerals is also up, with WH Ireland retaining its positive stance on the potash developer after reports commissioned by the North York Moors National Park Authority to review Sirius' proposal for its York potash project were published on its website. Boxhill Technologies is up after it said that profitability in the third quarter of its financial year exceeded the profit made in the whole of the first half, and it is confident that revenue in the full year will be at least double the revenue made the prior year.
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Top Economics And General
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The World Bank downgraded its global growth outlook as developing countries face a series of tough challenges in 2015. The global economy is expected to expand 2.8% instead of 3% estimated in January, the bank said in its Global Economic Prospects report. For next year, growth is forecast to improve to 3.3% and then 3.2% in 2017. Developing countries are projected to grow by 4.4% this year, with a likely rise to 5.2% in 2016, and 5.4% in 2017. However, in high-income countries, recovery is gaining momentum, as growth in the euro area and Japan picks up and the US continues to expand, despite a weak start to the year, the lender said.
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House prices in the UK are expected to move higher over the next three months, the latest survey from the Royal Institution of Chartered Surveyors showed, with an index score of +34. That touches a nine-month high, and it's up from +32 in April, although it was shy of expectations for +36. The increase in prices was the natural result of the Conservative Party's electoral victory last month, RICS said.
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The negotiations over Greece's bailout should be stepped up, Prime Minister Alexis Tsipras said early Thursday after crunch talks with his German and French counterparts, held amid growing fears that Athens could soon run out of money. "We have decided to intensify the discussions so that the remaining differences can be bridged, so that we reach a solution in the near future," Tsipras said after the two-hour meeting with German Chancellor Angela Merkel and French President Francois Hollande. It was the second time in three weeks that Tsipras, Merkel and Hollande met to discuss Greece's economic woes.
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German Chancellor Merkel's government may be satisfied with Greece committing to at least one economic reform sought by creditors to open the door to bailout funds, Bloomberg reported Wednesday citing two people familiar with Germany’s position. The report said that while the German government still insist on a package of steps that includes higher taxes, state asset sales and less generous retirement benefits, they may settle for a clear commitment by the Greek government to a measure up front to unlock aid, said the people, who asked not to be identified discussing the government’s negotiating stance.
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S&P Ratings Services cut its long-term sovereign credit rating on Greece to 'CCC' from 'CCC+', citing the likelihood of the nation defaulting on its commercial debt within the next 12 months in the absence of a bailout deal with its official creditors.
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Russian President Vladimir Putin denied that his country had become an international outcast after being expelled from the Group of Eight and slapped with sanctions over its actions in Ukraine. Putin spoke during an official trip to Italy and the Vatican. He first met Italian Prime Minister Matteo Renzi and visited the EXPO world fair in Milan, and later travelled to Rome to meet Italian President Sergio Mattarella and Pope Francis. "You asked about our relations with the G7. We have no relations with the G7," Putin said in a press conference with Renzi. "We had an alternative point of view but our partners have decided they do not need this alternative point of view," he added.
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China's industrial production growth improved slightly in May, just above economists' expectations, while retail sales growth accelerated as expected, figures from the National Bureau of Statistics showed. Industrial production grew 6.1% year-over-year in May, following a 5.9% gain in April. Economists had expected a 6.0% climb for the month. The statistical office also said retail sales surged a price-adjusted 10.1% in May, in line with consensus estimate, slightly faster than previous month's 10.0% hike. In March, sales had risen 10.2%.
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South Korea's central bank lowered a key interest rate to 1.5% on Thursday, citing concerns about the impact of Middle East Respiratory Syndrome, reports said, as the number of confirmed infections continued to rise. "The trend of decline in exports has accelerated and...consumption, which had been showing a recovery, appears to have contracted since the outbreak of MERS," the Monetary Policy Committee of the Bank of Korea wrote in its policy decision, according to Yonhap News Agency. "The downside risks to the domestic growth path forecast in April have expanded." The bank has made four rate cuts since August, and the current rate is a record low, Yonhap reported.
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Following recent setbacks in the fight against Islamic State militants, the White House announced that President Barack Obama has approved sending up to 450 additional US troops to Iraq. The additional US military personnel will train, advise, and assist the Iraqi security forces at Taqaddum military base in eastern Anbar province.
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Afternoon Watchlist (all times in BST)
13:30 US Retail Sales
13:30 US Jobless Claim
14:30 US Export/Import Price Index
15:00 US Business Inventories
15:30 US EIA Natural Gas Storage change
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Friday's UK Corporate Events
Ted Baker - Interim Management Statement
Sthree - Trading Update
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Friday's Key Economic Events (all times in BST)
05:30 Japan Industrial Production
n/a Germany Wholesale Price Index
10:00 EU Industrial Production
13:30 US Producer Price Index
15:00 US Reuters/Michigan Consumer Sentiment Index Preliminary 91.5 90.7
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