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(Alliance News) - Stagecoach has walked away from its all-share merger with larger UK peer National Express, opting for a cash offer instead.
Stagecoach shares were up 36% early Wednesday at 104.00p. National Express shares were up 10%.
The Perth, Scotland-based bus and train operator said its directors unanimously recommend a GBP594.9 million cash offer from Pan-European Infrastructure III, an infrastructure fund managed and advised by DWS Infrastructure.
They no longer recommend a previously agreed all-share merger with Birmingham-based National Express. That deal, struck back in December, would have created a GBP1.9 billion market-cap public transport provider, though it was being reviewed by the UK Competition & Markets Authority.
DWS will offer Stagecoach shareholders 105 pence in cash, which is a 37% premium to its closing price on Tuesday.
Stagecoach Chief Executive Martin Griffiths said the DWS deal "will open a new and exciting chapter".
"We also believe it will deliver positive outcomes both now and in the long-term for all of our key stakeholders: the customers and the communities we serve, the people who deliver our high-quality transport services, our partners in national and local government, and the investors who have supported our continued success over many decades," he added.
Under the new deal, Stagecoach will remain based in Perth. Under the proposed merger with National Express, the headquarters would have been in Birmingham.
The DWS offer has acceptance for 10.5% of Stagecoach from shareholder Ann Gloag. It needs 75% for the offer to be declared unconditional. DWS also has signed a memorandum of understanding with the trustees of the Stagecoach pension fund regarding future funding.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 1.9% at 7,095.42
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Hang Seng: down 0.7% at 20,627.71
Nikkei 225: closed down 0.3% at 24,717.53
S&P/ASX 200: closed up 1.0% at 7,053.00
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DJIA: closed down 184.74 points, or 0.6%, at 32,632.64
S&P 500: closed down 30.39 points, or 0.7%, at 4,170.70
Nasdaq Composite: closed down 35.41 points, or 0.3%, at 12,795.55
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EUR: up at USD1.0913 (USD1.0890)
GBP: unchanged at USD1.3112 (USD1.3110)
USD: up at JPY115.86 (JPY115.62)
Gold: down at USD2,043.70 per ounce (USD2,056.80)
Oil (Brent): down at USD129.54 a barrel (USD132.65)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's key economic events still to come
UK Financial Policy Committee meeting, attended by BoE governor
0700 EST US MBA weekly mortgage applications survey
1030 EST US EIA weekly petroleum status report
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UK government ministers were considering steps that could lead to a fracking rethink after committing to phasing out imports of Russian oil by the end of the year. Prime Minister Boris Johnson said on Tuesday the move over Moscow's oil was an important "first step" to "punish" Vladimir Putin's invasion of Ukraine as substitute fuels are lined up. Amid concerns over soaring energy costs, it was understood two Cuadrilla Resources sites in Lancashire may be handed over to the Royal Geographical Society rather than being concreted over. Fracking, or hydraulic fracturing, has been under a "moratorium" for over two years, but the move could allow for the sites to be opened up at a later date.
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For the first time since the war in Ukraine began, a safety corridor has been used to successfully evacuate thousands of civilians trapped inside the town of Sumy in north-eastern Ukraine. However, just hours beforehand, at least 21 people, including two children, were killed in Russian airstrikes on the town. The Russian military enforced a ceasefire on Tuesday and opened so-called "humanitarian corridors" in five cities. These include the capital Kiev, the major cities of Chernihiv and Kharkiv, Sumy and the particularly embattled port city of Mariupol. According to the deputy head of the Ukrainian President's Office, Kyrylo Tymoshenko, a total of 61 buses left Sumy for Poltava on Tuesday. Among the passengers were some 1,100 foreign students, he said.
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BROKER RATING CHANGES
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Deutsche Bank cuts ITV to 'hold' (buy) - price target 100 (130) pence
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RBC raises Vesuvius to 'outperform' (sector perform) - price target 475 (540) pence
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RBC raises Rotork to 'outperform' (underperform) - price target 345 (310) pence
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Berenberg cuts Victorian Plumbing to 'hold' ('buy') - target 70 (130) pence
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COMPANIES - FTSE 100
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Insurer Prudential reported "high-quality, resilient growth" as the Asia-focused insurer saw new business profit rise by a double-digit percentage. For 2021, pretax profit slipped by 5.0% to USD3.02 billion from USD3.18 billion in 2020. New business profit rose by 13%, however, to USD2.53 billion from USD2.20 billion. EEV operating profit increased 4.1% to USD3.54 billion from USD3.40 billion. Total revenue, net of reinsurance, dropped to USD26.50 billion from USD36.25 billion. Gross premiums earned rose to USD24.22 billion from USD23.50 billion, but Pru saw a marked drop in investment return of USD3.49 billion from USD13.76 billion. Annual premium equivalents grew 8% to USD4.19 billion from USD3.81 billion. Present value of new business premiums rose 12% to USD24.15 billion from USD21.59 billion. "Sales in Hong Kong continued to be constrained by the ongoing closure of the border with mainland China. However, excluding Hong Kong, APE sales were 16% higher. Eight markets in Asia and our Africa business saw double-digit growth including mainland China, India, Malaysia, the Philippines, Singapore and Thailand. The increase in APE sales, combined with an improvement in new business margins given a favourable shift in business mix, resulted in a 13% increase in group new business profit," Pru explained.
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Fellow insurer Legal & General delivered operating profit in line with internal guidance for 2021, with all of its businesses contributing to the "resilient" performance. "This marks a return to our long-term rate of growth, having been resilient through the pandemic. Our diversified business model benefited from the post pandemic economic recovery and easing of restrictions over 2021 to deliver strong earnings. All five businesses are well positioned to execute on compelling structural market opportunities to deliver further profitable growth," L&G said. For 2021, operating profit was up 1.8% to GBP2.26 billion from GBP2.22 billion in 2020. Excluding mortality releases, operating profit rose 11%, which was in line with company guidance issued with its interim results. L&G declared a full-year dividend of 18.45 pence, rising by 5.0% from 17.57p in 2020. Solvency II coverage ratio rose to 187% from 175% at the end of 2020. L&G "estimated" its coverage ratio had risen to 198% by the start of this week.
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Coca-Cola HBC noted the announcement by Coca-Cola Co that it is suspending its business in Russia. "Our relationship with the Coca-Cola Co remains strong, and we continue to work in close partnership across the rest of our markets," the drinks bottler said. Coca-Cola HBC last week had noted that Ukraine and Russia contributed 20% of its 2021 volumes and earning before interest and tax.
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Russian-linked miner and steelmaker Evraz said the sanctions imposed on Russia have seen "no material direct impact on day-to-day operations" on the company. Evraz - which operates mainly in Russia, but also in Ukraine and Kazakhstan among others - said it does not consider itself to be affected by the sanctions as it it is not "entity owned by, or acting on behalf or at the direction of, any persons connected with Russia." It noted some major shareholders - namely Roman Abramovich, Alexander Abramov and Alexander Frolov - are not necessarily "connected with Russia", despite being Russian nationals. Evraz said it is aware that if it does become "an entity owned by, or acting on behalf or at the direction of, a person 'connected with Russia'" then it could see its listing in London suspended.
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COMPANIES - FTSE 250
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Fellow Russian-linked miner Petropavlovsk also noted that its operations, which are located in the Far East of Russia, currently continue without interruption. Petropavlovsk continues to sell gold, as before, to domestic commercial banks at the London fixing and is therefore not affected by export controls at this time, it added. It also noted it has sufficient funds available to service its current debt.
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Wednesday's shareholder meetings
MTI Wireless Edge Ltd - AGM and EGM re remuneration, management services
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By Tom Waite; thomaslwaite@alliancenews.com
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