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(Alliance News) - IAG said Monday it has acquired Spanish airline Air Europa for EUR1 billion in cash. IAG already owns Spanish carriers Iberia and Vueling, as well as Ireland's Aer Lingus.
IAG said the Air Europa deal will transform the company's Madrid hub into a "true rival" for Europe's four largest hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
The company believes the acquisition will be earnings per share accretive in the first full year. The deal is also expected to generate "significant" revenue synergies by 2025.
IAG Chief Executive Willie Walsh added: "Acquiring Air Europa would add a new competitive, cost effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.
The deal is expected to be completed in the second half of 2020.
IAG shares were up 1.2% in early trade Monday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,323.23
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Hang Seng: up 1.6% at 27,528.94
Nikkei 225: Tokyo market closed for holiday.
DJIA: closed up 301.13 points, 1.1%, at 27,347.36
S&P 500: closed up 1.0% at 3,066.91
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GBP: soft at USD1.2933 (USD1.2941)
EUR: flat at USD1.1171 (USD1.1165)
Gold: firm at USD1,513.30 per ounce (USD1,511.25)
Oil (Brent): up at USD61.56 a barrel (USD60.66)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
Japan Culture Day holiday observed. Financial markets closed.
0930 GMT UK CIPS-Markit Construction purchasing managers' index
0955 CET Germany manufacturing PMI
1000 CET eurozone manufacturing PMI
0945 EST US ISM-NY report on business
1000 EST US manufacturers' shipments, inventories & orders
1000 EST US employment trends index
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The US is hopeful negotiations with Europe, Japan and South Korea on car manufacturing could avert a sharp increase in tariffs later this month, Commerce Secretary Wilbur Ross said on Sunday. "Our hope is that the negotiations we've been having with individual companies about their capital investment plans will bear enough fruit that it may not be necessary to put the 232 fully into effect, may not even be necessary to put it partly in effect," Ross told Bloomberg Television, referring to the investigation under Section 232 of a 1962 trade law. Ross, speaking in Bangkok, where he's attending a regional summit, told Bloomberg discussions thus far have been "very good" with the major car-producing countries in Europe, Japan and South Korea. There is currently a 2.5% tariff on cars imported into the US from the EU. US President Donald Trump has said he could raise this to 25%.
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Senior Chinese and US officials again sent positive signals on Friday about their efforts to formalize the partial trade bargain announced last month, with Trump saying he may meet with Chinese counterpart Xi Jinping in the state of Iowa. Chinese Vice Premier Liu He on Friday spoke by telephone with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, a call both sides described as "constructive".
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Thailand's prime minister said on Sunday that a Beijing-led free trade agreement between the 10 members of the Association of South-East Asian Nations and six other countries is expected to be signed in 2020. China has been working to secure the agreement, dubbed the Regional Comprehensive Economic Partnership, which would encompass one-third of world trade and include almost half of the world's population. The proposed Beijing-led deal gained new life after Trump pulled the US out of the 12-country Trans-Pacific Partnership. The RCEP involves ASEAN's 10 member nations and six other countries - China, Japan, India, South Korea, Australia and New Zealand - whose leaders will attend a meeting on the deal on Monday when the summit will also concludes.
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The UK economy is expected to only grow by 1.0% next year – down from previous predictions of 1.5%, new data shows. The latest economic forecast from the EY ITEM Club, which analyses official government data, said GDP is expected to be 1.3% for 2019 but will slow in 2020. Analysts said the reason for the downgrade from the summer, when a 1.5% growth was predicted, was due to the ramping up of political uncertainties in the UK. Even if the UK leaves the EU on January 31 2020, significant uncertainties will remain and will likely limit any immediate boost to economic activity, the report said.
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UK-listed companies saw profits fall in the third quarter of the year on average in the first quarterly drop since 2016, new research has found. Researchers also discovered that more than half of UK companies also reported lower profits for the second consecutive quarter. Revenues and sales were up 4.6% in the period, although this was below the average for the last three years and attributed to the weak pound helping listed companies that generate most of their income abroad, the latest Profit Watch UK index by the Share Centre said.
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Controversial fracking will no longer be allowed because of new scientific analysis, the UK government said. The announcement comes after a report by the Oil & Gas Authority found it is not currently possible to accurately predict the probability or magnitude of earthquakes linked to fracking operations. UK Prime Minister Boris Johnson had said on Thursday he had "very considerable anxieties" about the issue of shale gas extraction. And the government now says it will end its support for the process, and further proposals to change the planning process for fracking sites will no longer be taken forward.
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BROKER RATING CHANGES
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PEEL HUNT INITIATES WHITBREAD WITH 'BUY' - TARGET 4800 PENCE
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LIBERUM RAISES PETS AT HOME TO 'BUY' ('HOLD')
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COMPANIES - FTSE 100
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Insurer Hiscox said it was "pleased" with its growth in the third quarter, reporting a rise in written premiums from every division. Total gross written premiums rose 7.3% to USD3.21 billion in the period to September 30. Hiscox Retail reported a 7.0% rise in written premiums, Hiscox London Market 9.7% and Hiscox Re 6.1%. "The third quarter has been an active period for claims, with the market experiencing significant catastrophe losses from storms in the US, the Caribbean and Japan. Paying claims is what we are here for, and we have reserved USD165 million for claims from Hurricane Dorian and Typhoons Faxai and Hagibis. We expect an additional impact from lower fees and profit commissions," said Chief Executive Bronek Masojada.
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COMPANIES - FTSE 250
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Direct marketer 4imprint said demand has "remained robust" in the second half. The company said it has experienced growth in both new and existing customer orders consistent with that seen in the first half. 4imprint added: "The relatively new brand recognition element of the group's marketing activities continues to perform well. As a result, the board expects a strong full-year trading performance, with revenue growth of around 16% over 2018." 4imprint recorded pretax profit of USD44.2 million for the 52 weeks to December 29, 2018, on revenue of USD738.4 million.
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Marston's has sold 137 pubs for GBP44.9 million to Admiral Taverns. The company said the disposal is in line with its plans to reduce its debt in part through the disposal of certain non-core assets. The assets being disposed of are smaller wet-led leased, tenanted and franchised pubs. The deal is expected to complete before the end of November.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Ryanair Holdings reported a rise in revenue, but a steep rise in costs has hindered profit growth. For the six months to September 30, Ryanair's revenue was up 11% year-on-year to EUR5.39 billion. Traffic was up 11% to 86 million passengers with an unchanged load factor of 96%. Air fares were 5% lower, Ryanair noted, due to lower demand in the UK as well as overcapacity in Germany and Austria. Ancillary revenue however was up 28% to EUR1.65 billion. Group pretax profit was flat at EUR1.26 billion. Fuel & oil costs rose 22% to EUR1.59 billion, and overall costs climbed by 16% to EUR1.29 billion. "Our outlook for the remainder of the year remains cautious. We try to avoid the unreliable optimism of some competitors," added Ryanair.
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Kosmos Energy said it was able to continue to "build momentum" in the third quarter. In the three months to September 30, revenue rose to USD357.0 million from USD250.2 million the year before. As a result, the Dallas-headquartered firm swung to a net income of USD16.1 million compared to a loss of USD126.1 million the year before. Chair & CEO Andrew Inglis said: "At current oil prices we expect to deliver the 2019 free cash flow we set out at our capital markets day in February. Our 2019 drilling program in Mauritania and Senegal has increased the gas initially in place to the top end of our 50-100 Tcf range. Furthermore, our first infrastructure-led exploration well in Equatorial Guinea was successful and we expect this to further enhance the value of our Equatorial Guinea acquisition."
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COMPANIES - INTERNATIONAL
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Saudi Aramco announced Sunday its long-awaited stock market debut in what could be the world's biggest IPO, underpinning Crown Prince Mohammed bin Salman's ambitions to overhaul the kingdom's oil-reliant economy. After years of delay, Aramco said it plans to sell an unspecified number of shares on the Riyadh stock exchange, calling it a "historic" milestone for the energy giant which pumps 10% of the world's oil. However, the state firm said there were no current plans for an international listing, indicating that the long-discussed goal for a two-stage IPO including an offering on a foreign bourse had been put aside. With analysts saying that Aramco could be valued at up to USD1.7 trillion, the initial public offering is potentially the world's biggest, depending on how much of the company it decides to sell.
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Australia's Westpac Group announced full-year profit fell 16% to just under AUD6.8 billion, or USD4.7 billion, as the impact of a major banking industry scandal continues to bite. The Sydney-based bank, one of Australia's four largest financial institutions, said a program to reimburse overcharged customers and an overhaul of its wealth management business were the main drivers of lower profit. Excluding those costs, Westpac said earnings were still down 4% due to lower income from sales of insurance and wealth products as the firm abandoned its financial planning business. The bank cut its second-half dividend paid to shareholders by 15% to AUD0.80 per share on the back of its poor result, bringing the full-year dividend 7% lower to AUD1.74. It also announced a AUD2.5 billion institutional share placement and a AUD500 million offer of shares to existing shareholders.
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McDonald's Corp announced that Chief Executive Steve Easterbrook was departing after showing "poor judgment" by engaging in a "consensual relationship" with an employee. He was replaced by Chris Kempczinski, the president of McDonald's US. Kempczinski was also elected to the board of directors. "Easterbrook...has separated from the company following the board's determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee," the company said in a statement. "The company confirms that this leadership transition is unrelated to the company's operational or financial performance."
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Chinese conglomerate Fosun has snapped up the Thomas Cook brand for GBP11 million, weeks after the renowned British travel group went bust and left hundreds of thousands of holidaymakers stranded abroad. Hong Kong-listed Fosun, which was already the biggest shareholder in Thomas Cook and also owns France-based resort giant Club Med, had backed out of the eleventh hour deal to keep the debt-plagued company afloat. Fosun will now take ownership of the brand rights to Thomas Cook as well as subsidiary hotel chains Casa Cook and Cook's Club under the terms of the purchase agreement, it said in a statement late Friday.
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Monday's Shareholder Meetings
Genesis Emerging Markets Fund
NB Global Floating Rate Income Fun (re buyback authority)
Baillie Gifford US Growth Trust
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By Tom Waite; thomaslwaite@alliancenews.com
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