Shares in Johnson Matthey, the world's top supplier ofcatalytic converters, climbs 3.7 percent in brisk trade after itbuys Formox, a Sweden-based specialist chemical company, for 107million pounds ($161.7 million).
Trading volume in Johnson Matthey stands at 128 percent ofits 90-day daily average at mid-session, against the FTSE 100index at 30 percent of its 90-day daily average.
Morgan Stanley, in a note, describes the acquisition assensible, though says in the near term investors remainconcerned about automotive demand and platinum group metalsprices.
While the investment bank suggests the deal will reducegroup returns by about 30 basis points, it calculates 2.5percent earnings per share accretion for the year to March 2014- "which will help".
Shares in Johnson Matthey have fallen nearly 2 percent in2013 against a rise of more than 9 percent on the UK blue-chipindex.
Atif Latif, director of trading at Guardian Stockbrokers,says the acquisition may help mitigate margin pressures which,over the last few months, have been an overhang on the stock.
"This may lead to earnings revisions and... this should helpalleviate the relative underperformance (against the FTSE 100),"he says.
The mean analyst recommendation for Johnson Matthey is a"strong hold", according to data from Thomson Reuters Starmine.
Reuters messagingrm://tricia.wright1.thomsonreuters.com@reuters.net($1 = 0.6617 British pounds)
Johnson Matthey (JMAT)