LONDON MARKET PRE-OPEN: M&C Saatchi accepts Next Fifteen takeover bid

(Alliance News) - Stocks in London were looking to end another rocky week on a strong note as sentiment got a boost from an interest rate cut in China.

In early UK news, retail sales rebounded in April, driven by supermarket sales. Among London-listed companies, M&C Saatchi has backed a takeover offer from Next Fifteen Communications, spurning a hostile takeover bid by AdvancedAdvT.

IG says futures indicate the FTSE 100 index of large-caps will open up 65.16 points, or 0.9%, at 7,367.90 on Friday. The FTSE 100 closed down 135.35 points, or 1.8%, at 7,302.74 on Thursday - at this level down 1.6% since the week began.

Europe was looking to shake off losses in the US and follow Asian markets higher.

In Asia on Friday, the Japanese Nikkei 225 index closed up 1.3%. In China, the Shanghai Composite was up 1.5%, while the Hang Seng index in Hong Kong was up 2.5%. The S&P/ASX 200 in Sydney closed up 1.2%.

Asian stocks were boosted after China announced it will cut a key interest rate in a boost to home buyers and debt-mired developers, as the country's economy is slowed by Covid-19 restrictions in major cities.

The five-year loan prime rate – on which many lenders base their mortgage rates – was trimmed to 4.45% from 4.60%, China's central bank said on Friday. The haircut to the LPR was greater than the market expected, analysts said, as China's planners try to inject life into a slowing economy.

"Unlike Western central banks, PBoC is in easing mode, which eventually should support global growth, all else equal," said Danske Bank.

In the UK, data showed retail sales volume rose 1.4% in April on a month before, reversing a month-on-month fall of 1.2% in March. This was driven by food store sales, which rose 2.8%, largely due to higher spending on alcohol, tobacco and confectionery in supermarkets.

Heather Bovill, deputy director for Surveys & Economic Indicators at the Office for National Statistics, noted that along with an uplift for supermarkets, off-licenses also reported a boost, "possibly due to people staying in more to save money".

While retail sales picked up in April, she cautioned that the figures "still show a continued longer term downward trend".

Year-on-year, sales tumbled 4.9% in April, after growth of 1.3% in March. However, this was not as bad as the 7.2% drop forecast by analysts, according to FXStreet.

In early UK company news, digital marketing services firm Next Fifteen Communications waded into M&C Saatchi's takeover drama by making a GBP310.1 million cash-and-shares offer.

The company is offering 0.1637 of a Next Fifteen share and 40 pence in cash for each M&C Saatchi share, valuing M&C Saatchi shares at 247.2p each.

This deal represents a 48% premium to M&C Saatchi's closing price of 167.5p on January 4, the last business day before London-listed acquisition vehicle AdvancedAdvT said it has taken a minority stake.

Advertising agency M&C Saatchi was already the target of a hostile takeover attempt by AdvancedAdvT. Under AdvancedAdvT's most recent offer, shareholders in M&C Saatchi will for each share held either receive 2.043 new shares in AdvancedAdvT and 40 pence in cash, or receive 2.530 new AdvancedAdvT shares.

At the time the offer was made, this valued each share of M&C Saatchi at 207.5 pence and GBP253.6 million in total. However, M&C Saatchi rejected the offer, calling it "derisory".

Instead, the board is recommending Next Fifteen's takeover offer and urged shareholders to take no action in respect of AdvancedAdvT's offer.

AdvancedAdvT, in response to the Next Fifteen offer, said it is "considering its options". The company added that it and Executive Chair Vin Murria together own just over 22% of M&C Saatchi's share capital.

Elsewhere, Croda International backed its full-year forecasts following a strong start to 2022 which saw the firm "successfully" mitigate inflation pressures.

The specialty chemicals firm said demand was particularly strong in North America and Asia. "Notably, April sales in China were ahead of the prior year despite local Covid-19 lockdowns," said Croda.

By division, Consumer Care has seen strong demand, while there was also good growth in Beauty Actives, Beauty Care and Home Care.

Croda said it has seen "continued sales and profit growth" in the year-to-date.

Merchant bank Close Brothers reported third-quarter loan book growth.

In Banking, its loan book increased 1.8% in the quarter to GBP8.8 billion from GBP8.6 billion at the end of January, notching year-to-date growth of 3.7%. The firm said it is yet to see a "direct impact of the deteriorating economic conditions", but noted that the year-to-date bad debt ratio increased marginally to 1.2% from 1.1% at the half-year stage.

"Client assets reduced in Close Brothers Asset Management, reflecting negative market movements, and Winterflood saw an improvement in trading income," said Close Brothers.

Late Thursday, e-commerce platform THG confirmed that it has received and rejected a third non-binding takeover proposal from Belerion Capital Group and King Street Capital Management, on the grounds that the offer "significantly undervalues" the company.

The Belerion consortium made a proposal of 170 pence per share for the online beauty products seller, and has until 1700 BST on June 16 to make a firm offer or pull out. Belerion is an e-commerce and technology focused private equity firm, while King Street Capital is an alternative asset manager.

Also on Thursday, Luxembourg-based venture capital firm Candy Ventures owned by Nick Candy said that it is in "very early stages" of considering a possible offer for THG.

In the US on Thursday, Wall Street ended lower, with the Dow Jones Industrial Average ending down 0.8%, the S&P 500 down 0.6% and the Nasdaq Composite down 0.3%. Wall Street extended Wednesday's losses, which had seen the S&P close 4.0% lower.

"The one silver lining from the selling of the past two days was that we managed to close well off from last week's lows, suggesting a general reluctance to become too bearish too quickly. That said every single rebound we've seen since early April has seen a rebound shallower than the previous one followed by a lower low," observed CMC Markets's Michael Hewson.

While risk sentiment was improved on Friday, the safe-haven dollar still was on the front foot. Sterling was quoted at USD1.2477 in morning dealings, dipping from USD1.2503 at the London equities close on Thursday.

The euro traded at USD1.0585 early Friday, marginally soft against USD1.0590 late Thursday. Against the yen, the dollar was quoted at JPY127.76, up versus JPY127.40.

Gold was priced at USD1,846.26 an ounce early Friday in London, down a touch from USD1,848.44 late on Thursday. Brent oil was trading at USD111.79 a barrel, firming on USD110.05 late Thursday.

Friday's economic calendar has a flash eurozone consumer confidence report at 1500 BST.

By Lucy Heming; lucyheming@alliancenews.com

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