(Alliance News) - Stock prices in London are seen opening marginally lower on Monday, failing to benefit from positive momentum in equity markets elsewhere, amid fears over an Indian Covid-19 variant in the UK.
In early company news, Melrose Industries said it will sell its Nortek Air Management subsidiary for GBP2.62 billion and pledged to return some of the proceeds to shareholders. Speciality chemicals company Johnson Matthey announced a strategic partnership for sustainable battery materials production. US private equity firm Siris Capital Group has made a takeover offer for Equiniti Group.
IG futures indicate the FTSE 100 index is to open 4.43 points lower at 7,015.10. The blue-chip index closed up 36.03 points, or 0.5%, at 7,019.53 Friday.
The Japanese Nikkei 225 index ended flat on Monday. In China, the Shanghai Composite was up 1.4%, while the Hang Seng index in Hong Kong was up 0.6%. The S&P/ASX 200 in Sydney closed up 0.2%.
Melrose Industries said it has entered into an agreement to sell its Nortek Air Management business - comprising the Nortek Global HVAC and Air Quality & Home Solutions segments - to Chicago-based Madison Industries for around GBP2.62 billion.
Melrose said it intends to use part of the net proceeds to reduce debt and contribute around GBP100 million to the GKN UK defined-benefit pension schemes, which means that the funding deficit will have been reduced from approximately GBP1 billion to GBP200 million under Melrose's ownership of GKN, a UK-based engineering firm. Melrose also said it intends to return a portion of the net proceeds to shareholders.
Completion of the deal is expected to occur in the second or third quarter of 2021 subject to shareholder approval, the industrial turnaround specialist added.
"The disposal demonstrates the strength of the Melrose strategy. We bought Nortek, an underperforming group, which we felt had outstanding potential in 2016 for GBP2.2 billion. We have seen approximately USD1 billion of cash inflows from the Nortek group during our ownership, effectively giving us an in-price of USD1.8 billion. The businesses being sold today for GBP2.62 billion represent 73%, by revenue, of the Nortek group and the returns are excellent. Our Ergotron and Nortek Control businesses which also form part of the Nortek group remain under our ownership and will be realised at an appropriate time," said Chair Justin Dowley.
Johnson Matthey said it has entered into a strategic partnership with Finnish Minerals Group for sustainable battery materials production.
Johnson Matthey said the partnership will support development of a second commercial plant for eLNO cathode materials, which will be located in Finland and powered solely by renewable energy.
Johnson Matthey aims to take market share in the growing electric vehicle battery market with its eLNO technology. The company says eLNO offers more energy density and uses less cobalt compared to traditional electric vehicle batteries amid a projected shortfall in cobalt supply. Further, cobalt is expensive to harness, which makes its use in large electric car batteries uneconomic.
In addition, Johnson Matthey signed an agreement with SQM for supply of lithium hydroxide from SQM's Salar del Carmen plant in Antofagasta, Chile, and with Nornikel for nickel and cobalt supply from Finland and Russia.
"The partnership with Finnish Minerals Group, and the long term supply of critical raw materials with Nornickel and SQM, are important milestones on our journey towards developing a sustainable battery materials ecosystem and further demonstrate the progress we are making on the commercialisation of our business. With sustainability at the heart our strategy and an increasingly important requirement for our customers and consumers, we are delighted to be working with our partners to deliver sustainable cathode materials to the market," said Johnson Matthey Chief Executive Officer Robert MacLeod.
Siris Capital Group confirmed a press report from Sky News of a takeover offer for Equiniti Group at 170 pence per share. The offer is a 24% premium to Friday's closing price of 137.60p.
Equiniti handles most of the FTSE 100's dividend payments.
Over the weekend, Sky News reported that Siris may make a formal approach for a 170 pence per share bid this week, the same price as its most recent offer in January, citing banking sources, which would value the FTSE 250-listed firm at around GBP600 million.
In London early Monday, the call for a marginally lower market open came as the UK government, over the weekend, expressed fears about the new Indian variant of Covid-19.
The Indian coronavirus mutation could "scupper" the UK's march to freedom, a leading scientist has warned, despite the lockdown and vaccine programme leading to cases falling to a seven-month low.
According to the latest update from Public Health England, 77 confirmed cases of the B.1.617 variant, which was first discovered in India, have been detected in the UK, including 73 in England and 4 in Scotland.
UK Environment Secretary George Eustice defended the government's decision not to further restrict travel to the country, but said the situation is being kept "under regular review".
Amid growing fears that the new strain could delay the UK government's lockdown easing road map, Eustice added that it is "too early to say" whether all hospitality businesses can open on May 17 as ministers must keep "a close eye on these variants of concern".
Imperial College's Danny Altmann said those arriving into the country from India should be subject to a hotel quarantine if the UK is to shut out variants that could set back Prime Minister Boris Johnson's lockdown easing plans.
But despite the warnings, Downing Street has insisted Johnson's trip to India later this month - his first major international visit since securing a Brexit trade deal with Brussels - will go ahead.
The pound was quoted at USD1.3851 early Monday, up from USD1.3821 at the London equities close Friday.
UK house prices notched another record high in April, numbers from property listing portal Rightmove showed, rising more than 2% monthly for just the second time over the past five years.
The UK housing market produced a fast resurgence after re-emerging from the UK's first national lockdown in Spring of last year. Since then, the sector has been largely spared from tough restrictions to curb the spread of Covid-19.
According to Rightmove, UK house prices rose 2.1% monthly in April, to a new record high of GBP327,797.
Meanwhile, an increasing number of firms expect their prices to increase significantly in the coming months, new research suggests.
The prediction comes amid growing concern among businesses over rising inflation, said the British Chambers of Commerce. Its survey of more than 5,800 firms found that two in five believe their prices will increase in the next three months. Around a third of respondents said inflation is a cause for concern.
The euro was priced at USD1.1960 early Monday, down from USD1.1981 late Friday. Against the Japanese yen, the dollar was quoted at JPY108.67, lower from JPY108.82.
Brent oil was quoted at USD66.56 a barrel Monday morning, down from USD66.70 late Friday. Gold was trading at USD1,780.44 an ounce, marginally higher from USD1,778.24.
Monday's economic calendar has eurozone construction output data at 1000 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Johnson Matthey (JMAT)
Melrose (MRO)