LONDON MARKET PRE-OPEN: Entain confirms Draftkings takeover approach

(Alliance News) - Stock prices in London are seen opening higher on Wednesday ahead of the US Federal Reserve's interest rate decision, with investors awaiting a signal on when the central bank will begin pulling back on its stimulus policies.

In early company news, Ladbrokes betting chain owner Entain confirmed a takeover approach from Boston, Massachusetts-based peer Draftkings. Safety equipment firm Halma raised its guidance, and personal care products maker PZ Cussons reported strong annual results.

IG futures indicate the FTSE 100 index is to open 27.22 points higher at 7,008.20. The blue-chip index closed up 77.07 points, or 1.1%, at 6,980.98 Tuesday.

Entain confirmed a press report from CNBC on Tuesday that it received a takeover approach from US sports betting firm DraftKings.

Entain said that an earlier approach from DraftKings at 2,500 pence per share, which comprised of a combination of DraftKings shares and cash, was rejected. In addition, another proposal was received on Sunday by which DraftKings would offer 2,800p per Entain share, consisting of 630p in cash and the balance payable in new DraftKings Class A common shares.

The latest offer represented a premium of 46% to Entain's closing share price on Monday.

In response, Entain said it would "carefully consider" the proposal and a further announcement will be made as and when appropriate. Shareholders were urged to take no action.

Gambling peer Flutter Entertainment said its legal dispute with the US state of Kentucky has been settled in full.

As part of the settlement, Flutter has agreed to pay USD200 million to the Commonwealth of Kentucky in addition to USD100 million previously forfeited. In return, Kentucky has agreed to cease all further actions with respect to the case.

The case related to the reinstatement of a USD870 million fine by the Commonwealth of Kentucky, first imposed in 2010 against subsidiaries of Stars Group, prior its merger with Flutter last year.

Halma said it has made strong progress in the first half with its financial performance ahead of expectations, as the safety equipment maker issued improved guidance for the full year.

Halma said revenue growth and return on sales has exceeded expectations and historic levels and order intake has been ahead of both revenue this year and of order intake for the same period last year.

As such, Halma expects to report strong organic constant currency revenue and profit growth for the first half of the year to September 30, with profitability benefiting from a slower-than-expected return of variable overhead costs as Covid restrictions eased. This performance compares to a weaker comparative period in the first half of the 2021 financial year when Halma saw the worst damage from the pandemic, it added.

"Although we expect to see continued impact on revenue, costs and working capital from increased supply chain, logistics and labour market disruption, we currently expect adjusted profit before tax for the full year to be slightly ahead of our previous guidance. Therefore, our results for the full year are expected to be more weighted to the first half than in previous years," Halma said.

PZ Cussons reported a strong annual performance, with the personal care products maker buoyed by increase demand for its hygiene products during the pandemic.

For the financial year ended May 31, revenue was GBP603.3 million, up 2.7% from GBP587.2 million. Pretax profit was GBP63.2 million, more than triple GBP18.3 million a year ago.

PZ Cussons raised its total dividend 5.0% to 6.09p from 5.80p.

Chief Executive Jonathan Myers commented: "We were able to demonstrate improved levels of profitability and significantly step up investments in marketing activity and commercial capabilities as we set out to be a business that builds stronger brands and serves more consumers. This was set against a backdrop of the Covid-19 pandemic, which saw unprecedented levels of demand for Hygiene products.

"Our brands were available for our consumers when they needed them most and we retained market leadership - both with Carex in the UK and Morning Fresh in Australia. We were also pleased with the strong performance of our Baby and Beauty businesses, as consumer hygiene habits start to normalise."

European stocks were seen higher as the US central bank continues its two-day policy meeting.

The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

The Fed has said its benchmark borrowing rate will remain at record lows for some time, so the first step for the central bank will be to start to slow its massive monthly bond-buying programme, which is expected before the end of the year.

Investors will be watching to see if Powell provides details on the taper plan. Monthly asset purchases currently total at least USD80 billion in Treasury securities and USD40 billion in agency mortgage‑backed securities.

Meanwhile, embattled Chinese property firm Evergrande said Wednesday it had agreed a deal with domestic bondholders that should allow the conglomerate to avoid default on one of its interest payments.

Financial markets have tumbled over fears that the Chinese group could collapse, with the potential to derail the world's second-biggest economy.

In a statement to the Shenzhen stock exchange, Evergrande's property unit Hengda said it had negotiated a plan to pay interest due on its 2025 bond, which Bloomberg News calculated was worth USD35.9 million.

CMC Markets analyst Michael Hewson said: "Today's European open looks set to be a positive one after yesterday's rebound, with the main focus now shifting towards the Federal Reserve monetary policy decision, although concern over Evergrande remains.

"More importantly, with Chair Powell due to speak later, investors will be looking to determine whether recent events around surging energy prices, and Evergrande, have altered the prevailing narrative, that until a week ago, had been very much that this meeting was a waypoint on the way to the September payrolls number, which is due on October 8. A decent number in October would more or less set in motion a timeline to the start of a tapering of asset purchases in either December or January."

The Japanese Nikkei 225 index ended down 0.7%. In China, the Shanghai Composite was up 0.2%, reopening after being closed for the Mid-Autumn festival, while markets in Hong Kong were closed for a holiday. The S&P/ASX 200 in Sydney closed up 0.3%.

The Bank of Japan on Wednesday decided by an 8-1 majority vote to keep a negative interest rate of 0.1%.

BoJ also kept its loose monetary policy unchanged. The bank said it will continue expanding the monetary base until the year-on-year rate of increase in the consumer price index exceeds 2% and stays above the target in a "stable manner".

Japan's central bank noted that local economy has picked up as a trend, although it has remained in a "severe situation" due to coronavirus, both at home and abroad. Exports and industrial production have continued to increase despite supply-side constraints.

However, the bank noted that the level of Japan's economic activity in the face-to-face services sector is expected to be lower than that prior to the pandemic for the time being.

The pound was quoted at USD1.3650 early Wednesday, up from USD1.3643 at the London equities close on Tuesday.

The euro was priced at USD1.1725, up from USD1.1714. Against the Japanese yen, the dollar was trading at JPY109.58, higher against JPY109.26.

Brent was quoted at USD75.45 a barrel Wednesday morning, up sharply from USD73.84 late Tuesday. Gold stood at USD1,779.85 an ounce, down from USD1,781.03.

Wednesday's economic calendar has the latest Ifo economic forecast for Germany at 0900 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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