LONDON (Alliance News) - Stocks in London traded mixed midday Monday, with RSA Insurance tumbling after Switzerland's Zurich Insurance pulled out of talks to acquire the FTSE 100 insurer.
RSA said that as a result of the recent deterioration of trading conditions in Zurich's general insurance arm, it had decided to pull out of the talks. RSA said Zurich had confirmed its due diligence findings were in line with its expectations and it had not found anything related to RSA that would have prevented it from going ahead with the talks.
Zurich cited deteriorating conditions in its general insurance business, both due to wider trading issues but also thanks to a loss of approximately USD275.0 million that the general insurance arm will book related to the series of explosions which took place at a container storage station at Tianjin port in China in mid-August.
Zurich originally disclosed an interest in bidding for RSA at the end of July. It then had bid around GBP5.6 billion in a deal RSA said it was willing to recommend to shareholders. RSA shares slumped 20% to 405.40 pence following the news, comfortably making them the worst performer in the FTSE 100 and below their price of 435.50p before Zurich confirmed interest in July.
Panmure Gordon downgraded RSA to Sell from Hold and slashed its price target to 385 pence from 550p, saying that it was surprised by the news as it "felt that unless anything untoward has been uncovered in due diligence by Zurich, the deal would have gone through at 550p per share."
Shore Capital also cut its rating on the London-listed insurer to Hold from Buy.
Terminated takeover approaches were not limited to large caps, with shares in AIM-listed Chinese software and services company Geong International falling after Hanafin Investments said it will not be making a bid for the company and will not be converting its stock options.
Hanafin made its statement after Geong said last week it will likely have to make a "significant provision" against the carrying value of accrued income and trade debtors, following an audit.
Geong shares were down 64% on the news to 1.25 pence, a new 52-week low.
The FTSE 100 index traded up 0.5% at 6,133.21 points. The midcap FTSE 250 index was down 0.1% at 16,932.45, and the AIM All-Share was down 0.2% to 740.64
In Europe, the French CAC 40 was up 0.8% and the German DAX 30 was down 0.7%. In Frankfurt, Volkswagen shares were down 21% after the European car giant was accused by the US government of installing software to defeat emissions controls on nearly half a million diesel vehicles sold in the US since 2008.
The US Environmental Protection Agency charged that Volkswagen used software, dubbed a "defeat device", on these vehicles that turned off emission controls during all normal driving conditions and turned the full emissions controls on only during an emission test.
Volkswagen's Chief Executive Officer Martin Winterkorn apologized for customers' "broken trust". The company has ordered an external investigation of the matter and said it would halt American sales of popular diesel-powered cars.
Futures pointed Wall Street for a modestly higher open, with the Dow 30, S&P 500 and Nasdaq 100 all indicated up 0.1%.
Elsewhere on the London Stock Exchange, Shire was the best performer in the FTSE 100, up 2.4% after it received approval from the European Commission for Intuniv for the treatment of attention deficit hyperactivity disorder in children and adolescents from 6 to 17 years old for whom stimulants are not suitable, not tolerated or ineffective.
The Irish pharmaceutical company also was upgraded to Overweight from Equal Weight by Barclays which said the company has a strong merger and acquisition appetite and there are upside risks from its lifitegrast treatment.
Inmarsat shares were up 2.0% after it agreed a strategic partnership with German telecommunications provider Deutsche Telekom to develop a new combined satellite and a high-speed ground network, to be dubbed the 'European Aviation Network.'
The network is designed to provider in-flight high-speed internet access in Europe. The network will combine coverage from Inmarsat's new S-band satellite with a ground network operating in the same frequency band developed and run by Deutsche Telekom.
In the FTSE 250, Rotork shares were the biggest faller, down 8.0% after a number of broker downgrades following its profit warning last Thursday. JPMorgan Cazenove and Exane BNP Paribas both cut their target prices on the actuators and flow control products manufacturer, adding to the slew of ratings and price target downgrades at the end of last week.
In AIM, Sable Mining Africa was up 94%. The miner said it has entered into a memorandum of understanding with China-based construction and services provider CITIC Group to develop a coal-fired power plant in Zimbabwe.
The pair will develop a 600 megawatt coal-fired power plant at Sable's Lubu coal project using coal mined from Sable's Lubu project, which in the Mid Karoo Zambezi coal basin in the Hwange mining district. The MoU is supported by the Republic of Zimbabwe and the Ministry of Energy and Power Development, which is the administration in charge of power development, in line with its mandate to promote the development of energy and power generation in Zimbabwe.
Still ahead in the economic calendar US existing home sales are expected at 1500 BST, while Federal Reserve Bank of Atlanta President Dennis Lockhart speaks before the Buckhead Rotary Club in Atlanta at 1800 BST.
The changes from the latest FTSE index review were implemented Monday, seeing Weir Group drop into the FTSE 250 and housebuilder Berkeley Group Holdings promoted to the FTSE 100.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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30 Sep 2016 10:25
