UK MIDDAY BRIEFING: M&A News, CEO Steals Dominate

LONDON (Alliance News) - The London equities markets are being dominated by merger and acquisition news and chief executive changes Wednesday, with Shire losing almost a quarter of its value after AbbVie said it was reconsidering its takeover offer for the Irish drugs company.

US drug maker AbbVie said late Tuesday that it intends to reconsider the recommendation made to its shareholders to adopt the takeover agreement to acquire Shire amid proposed tax rule changes in the US. It had sent Shire a notice about its intention to withdraw or modify its recommendation.

On September 22, US Treasury Secretary Jacob Lew announced new measures to make so-called tax inversion deals less appealing, including a ban on companies using foreign cash without paying US taxes. The regulations are not retroactive, but came into effect immediately, meaning that they would apply to AbbVie's deal for Shire.

AbbVie's board will meet on October 20 to makes its decision, making it clear that it has not yet withdrawn its offer, which values Shire at GBP32 billion, or USD54.7 billion.

Shire said it thinks AbbVie should proceed with its recommended offer for the company, and noted that Shire would be due a break fee of about USD1.64 billion if the deal is called off. However, if AbbVie's own shareholders vote down the deal, the US company will only have to pay Shire USD500 million.

"The board of Shire has not been provided with a detailed analysis of AbbVie's tax assumptions and AbbVie's notice does not quantify the anticipated financial impact of the US Treasury Notice on the combination," it said.

Bluetooth specialist CSR is up 30% on the FTSE 250 after US semiconductor company Qualcomm Inc swooped in with a GBP1.6 billion, 900 pence-a-share, cash takeover offer on the deadline day that Microchip Technology Inc had been given to make a firm offer for the British company.

BG Group is one of the best-performing stocks on the FTSE 100 after it poached Helge Lund from rival Statoil to be its new chief executive from next March. Norwegian state-controlled energy company Statoil said Lund had left it with immediate effect.

Lund will be given a remuneration package that is "competitive in the international oil and gas industry", BG said. The package comprises a base salary of GBP1.5 million, a 30% cash payment in lieu of pension, a short-term cash incentive worth 100% of base salary for target performance with a maximum payment of 200% of base, an annual LTIP grant with a face value of six times salary, and a one-off relocation allowance of up to GBP480,000.

He also has a 12-month notice period, with the company reserving the right to make a payment in lieu of notice of 130% of base salary. He also has a buy out of unvested variable pay in BG shares of up to GBP3 million.

"Helge's track record speaks for itself. He has built a world-class exploration and production portfolio at Statoil, and the company is now widely admired for its technical expertise, financial performance and strong, values-based culture. Helge is ideally suited to lead BG Group in the next phase of its growth," said BG Chairman Andrew Gould,who led the search for a new CEO.

Balfour Beatty, meanwhile, is one of the best-performing stocks on the FTSE 250 after it poached the chief executive of defence products company QinetiQ Group, Leo Quinn, to be its own CEO from January 1, 2015, a job that will involve turning the struggling company around after a string of profit warnings, a failed merger attempt from rival Carillion, and the disputed sale of its US project management business.

Civil engineer Quinn had started his career at Balfour Beatty, going on to be CEO of banknote printer De La Rue between 2005 and 2009. Prior to that he was chief operating officer of Invensys' production management business, and before that held management positions at Honeywell for 16 years. QinetiQ is down 10%.

"Balfour Beatty is a world-leading brand with world-leading talent. Having started my career there, I am very proud to be rejoining a company so ingrained in British engineering, and am resolute in my ambition to realise its enormous potential for customers, employees and investors," Quinn said.

He will get a basic annual salary of GBP800,000, "with pension and benefit provision in line with the company's approved remuneration policy". He will also participate in the company's annual bonus and long-term incentive plans, and Balfour will compensate hit for incentive awards he is giving up by leaving QinetiQ, it said, without giving more details.

On the main market, Petropavlovsk is up 10% after it said Pavel Maslovskiy will return to the company as chief executive as long as its board approves the move, after the co-founder retired as a Member of the Federation Council, Russia's upper house of parliament.

The miner said Maslovskiy has indicated that he will be available to re-join its board and the executive management team from October 15, and it intends to seek board approval to make him CEO at a meeting on October 21. Current CEO Sergey Ermolenko will revert to his original role as general director of Management Company Petropavlovsk, it said.

Maslovskiy and Chairman Peter Hambro founded Petropavlovsk in 1994, but the company is now facing the need to refinance, a process Maslovskiy will oversee.

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Markets: UK shares have fallen heavily with the focus on individual stocks, as Shire lost a quarter of its share value after AbbVie appeared to have got cold feet on its acquisition of the company. Positive UK unemployment data helped sterling recover against the dollar, after low inflation figures knocked the pound below the USD1.60 mark Wednesday.

Futures indicate a flat opening across the board for the main US indices.

FTSE 100: down 0.9% at 6,335.68
FTSE 250: down 0.1% at 14,655.22
AIM ALL-SHARE: down 0.9% at 691.98
GBP-USD: up at 1.5916
EUR-USD: down at 1.2642
GOLD: down at USD1,223.77 an ounce
OIL (Brent): down at USD84.05 a barrel
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Other Top UK Corporate News
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Mining giant Rio Tinto reported higher iron ore shipments and production in the third quarter, and backed its iron ore production forecast for the full year, while lifting guidance for copper output. While production of copper increased, bauxite aluminium and coal saw a decline from last year. For the third quarter, the company's global iron ore shipments rose 15% year-over-year to 78.0 million tonnes. Global iron ore production grew 12% to 76.8 million tonnes. Sequentially, iron ore shipments grew 3%, and production increased 5%.
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Precious metals miner Fresnillo raised its 2014 gold production target to take account of its recent acquisition of the whole of its former Penmont joint venture, although third quarter gold production was down on the year due to a stoppage at another mine. The company said it now expects consolidated attributable gold production to be 590,000 ounces in 2014, reflecting the full consolidation of the Penmont assets and temporary disruptions it suffered at the Herradura mine up until March.
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The Weir Group said it has entered into an agreement to buy Chinese-American crushing and separation equipment manufacturer Trio Engineering Products. The FTSE 100-listed group will pay USD220 million to buy the company, which it said will expand its portfolio for mining customers and will provide it with scale in growing aggregates markets. Weir will fund the deal via existing bank facilities and said the deal will be immediately earnings accretive, with post-tax returns from the deal expected to exceed the cost of capital for Weir group within its first year of ownership.
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Barclays' auction of its index business has hit a snag, Reuters reported late on Tuesday. According to the report, which cited two people familiar with the matter, would-be buyers realised that some crucial bond pricing data that does not belong to the British bank will not be part of the package. The data in question belongs to third parties, including Bloomberg LP and Interactive Data Corp, the sources told Reuters, adding that those entities won't allow the data to be sold as part of the deal.
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Aldermore Group said it has decided against proceeding with its initial public offering in London, citing the "recent deterioration" of global equity markets. Earlier this month Aldermore had set the price range for the IPO at between 217 and 265 pence per share, with the mid-point implying a market capitalisation of about GBP800.0 million on admission to the main market of the London Stock Exchange.
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AIM Movers
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EMED Mining Public is doing well after a subsidiary of Trafigura Beheer BV asked the company to hold an extraordinary general meeting to vote on proposals to remove seven directors. EMED said Urion Holdings (Malta) Ltd, a unit of the Dutch commodities trader which holds an 18% stake in the business, has requested a meeting to proposed the removal of seven directors of the EMED and the addition of four. Wandisco is up after it said subscription bookings in the third quarter hit a record level and it expects to win a number of new subscription contracts in coming months. Altona Energy is another gainer after it said Chris Lambert has resigned as its chief executive and will step down from its board, with Executive Chairman Michael Zheng taking on the chief executive role. Arian Silver is up after it secured a USD32 million financing package for its San Jose silver project in Mexico. Arbuthnot Banking Group and Secure Trust Bank, in which Arbuthnot owns 53.26%, are both higher after they Arbuthnot said it expects its full year results to be marginally ahead of market expectations and Secure Trust Bank said it expects its full year to to be at or above market expectations.
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Top Economics And General
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The UK unemployment rate fell to the lowest since late 2008, data from the Office for National Statistics showed. The jobless rate fell to 6% during June to August, the lowest since late 2008 and down from 6.5% seen in March to May period. Economists had forecast a rate of 6.1%. During June to August, there were 1.97 million unemployed, 538,000 fewer than a year earlier. This was the largest annual fall in unemployment since record began in 1972. The claimant count rate fell to 2.8% in September as expected, from 2.9% in August.
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Germany's consumer price inflation held steady at 0.8% as initially estimated in September, final data from Destatis showed. This was the lowest rate since February 2010, when prices gained 0.5%. Month-on-month, consumer prices remained unchanged in September. The harmonized index of consumer prices rose 0.8% in September from last year and remained flat on a monthly basis.
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Chinese consumer prices slowed slightly more than expected in September, figures from the National Bureau of Statistics showed. Consumer prices grew 1.6% year-over-year in September following the 2% rise in August. Economists had expected inflation to slow to 1.7%. This marked the second consecutive month of slowing.
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Police in Hong Kong cleared demonstrators from a tunnel near government headquarters early Wednesday, news reports said, as pro-democracy protests continued their third week. Security forces used pepper spray and arrested 45 people before dawn as they cleared Lun Wo Road, which had been blocked since the previous evening, the South China Morning Post reported. A video circulated online of a group of officers apparently leading a handcuffed protester around a corner and beating him. The authorities said there would be an investigation.
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Japan's industrial output was revised to show steeper decline in August, final figures from the Ministry of Economy, Trade and Industry showed. Industrial production fell 1.9% month-over-month in August, which was faster than the 1.5% drop estimated earlier. In July, production had decreased 0.4%. On a year-over-year basis, industrial output dropped 3.3% in September, exceeding the flash estimate for a 2.9% decrease. This follows the 0.7% fall in July.
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The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, The Telegraph quoted the Bank of International Settlements as warning. The newspaper quotes Guy Debelle, head of the BIS’s market committee, saying in a speech in Sydney that investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to “blow up” as the first sign of stress.
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The Republic of Ireland is to shut its so-called “Double Irish” corporate tax loophole from the beginning of next year, bowing to intense pressure to close one of the most controversial measures in international tax planning, the Financial Times reports. The strategy, which allowed US technology and pharmaceutical groups to avoid paying tax on billions of dollars of income over two decades, helped to create Ireland’s Celtic Tiger economy before the financial crisis. For years Dublin resisted intense pressure from its EU partners over what they regarded as unfair tax competition, the FT said.
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A second health care worker in Texas who provided treatment to Thomas Eric Duncan, the first patient to be diagnosed with Ebola outside of Africa, has tested positive for the disease, state health officials said.The employee reported a fever on Tuesday and was immediately isolated, the Texas Department of State Health Services said in statement. Those who have had recent contact with the worker have been identified and will be monitored, it said.
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The US-led coalition against Islamic State militants said Tuesday it had carried out its most intense bombardment yet of jihadist positions around the besieged Kurdish town of Kobane in northern Syria. US and Saudi fighters and bombers carried out 21 strikes on Islamic State positions around the town between Monday and Tuesday, US Central Command said.
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Afternoon Watchlist (all times British Summer Time)

13:30 US NY Empire State Manufacturing Index
13:30 US Producer Price Index
13:30 US Retail Sales
15:00 US Business Inventories
16:30 US 4-Week Bill Auction
16:30 US 52-Week Bill auction
19:00 EU ECB President Draghi's Speech
19:00 US Fed's Beige Book
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Thursday's Key UK Corporate Events

Avacta Group - Full Year Results
WH Smith - Full Year Results
Booker Group - Half Year Results
e2v technologies - Trading statement
Telford Homes - Trading statement
British Sky Broadcasting Group - Q1 Results
Diageo - Interim Management Statement
Man Group - Interim Management Statement
Rank Group - Interim Management Statement
Renishaw - Interim Management Statement
Speedy Hire - Trading statement
Evraz - Interim Management Statement
Mondi - Interim Management Statement
Bwin.Party Digital Entertainment - Interim Management Statement
Game Digital - Full Year Results
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Thursday's Key Economic Events (all times British Summer Time)

03:00 China FDI - Foreign Direct Investment
09:00 Italy Trade Balance
10:00 EU Consumer Price Index
10:00 EU Trade Balance
13:00 US Philadelphia Fed's Plosser speech
13:30 US Jobless Claims
14:00 US Fed's Lockhart speech
14:15 US Industrial Production
15:00 US Fed Minneapolis's Narayana Kocherlakota speech
15:00 US NAHB Housing Market Index
15:00 US Philadelphia Fed Manufacturing Survey
15:30 US EIA Natural Gas Storage change
16:00 US EIA Crude Oil Stocks change
18:00 US Fed's Bullard speech
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