UK MIDDAY BRIEFING: TUI Travels Higher As Merger Terms Revealed

LONDON (Alliance News) - TUI Travel shares are up Monday after the company revealed the details of its proposed merger with German parent TUI AG and said TUI Travel shareholders would end up with a 46% stake in the combined group, while drinks makers are doing well on the back of merger and acquisition speculation surrounding brewing giant SABMiller.

The planned merger between TUI AG and TUI Travel ends years of speculation that the German parent would eventually take full control of its UK travel unit, and TUI Travel is among the best-performing stocks on the FTSE 100 Monday, up 1.7% at 366.40 pence.

In a joint statement, the companies said that taking into consideration TUI AG's existing stake in TUI Travel, the merger is expected to result in existing TUI Travel shareholders owning 46% of the combined group and existing TUI AG shareholders owning 54%, on a fully-diluted basis. TUI AG currently owns 51% of TUI Travel.

TUI Travel shareholders will receive 0.399 new TUI AG shares for each share they hold, and TUI Travel shareholders, including TUI AG, will also receive a second interim dividend.

The companies said the merger is expected to be earnings per share accretive for both sets of shareholders from the first full financial year post-merger. Alexey Mordashov, TUI AG's largest shareholder, has confirmed his support for the deal, they added.

SABMiller is the best-performing stock in London's blue-chip index, with its shares trading 10.3% higher at 3757.50 pence. Bloomberg reported that the company had a bid for Heineken rejected by the family that controls the Dutch brewer.

SABMiller has long been the subject of speculation about a possible bid from AB InBev, the Belgium-based beer group which has spent nearly USD100 billion on acquisitions in the past decade. Analysts believe that the rejection of a tie up between SABMiller and Heineken could be an opportunity for AB InBev to make good on recent speculation of a takeover bid for SABMiller.

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Markets: UK stocks are trading lower Monday morning, with the Scottish independence vote looming ahead and weak Chinese economic data reported over the weekend, but individual stock news is taking centre stage in the absence of fresh market-moving economic or political events.

Futures indicate that the DJIA, the S&P 500 and the Nasdaq Composite will all open a little lower.

FTSE 100: up 0.1% at 6,810.94
FTSE 250: down 0.2% at 15,680.32
AIM ALL-SHARE: down 0.3% at 774.76
GBP-USD: down at 1.6242
EUR-USD: down at 1.2918
GOLD: up at USD1,235.80 an ounce
OIL (Brent): up at USD97.70 a barrel
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Other Top UK Corporate News
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The US unit of HSBC Holdings Friday agreed to pay USD550.0 million to settle claims over the sale of residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac in the years leading up to the financial crisis. The settlement is lower than the maximum amount previously indicated by the bank holding company in its August 2014 half-year results statement.
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Enterprise software developer Micro Focus International confirmed it has agreed a reverse takeover of US-based The Attachmate Group Inc. Additionally, Micro Focus announced plans to return GBP83.9 million to shareholders at a rate of 60 pence per share, and simultaneously undertake a proportionate share consolidation. The share consolidation will give shareholders 0.9285 new shares for each existing share held. Under the agreement Micro Focus plans to acquire the entire issued share capital of Attachmate by issuing 86.60 million shares to Attachmate's parent company Wizard Parent LLC, equivalent to 40% of the new company's enlarged share capital.
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Investec said it has agreed to sell Irish intermediated mortgage business Start Mortgage Holdings Ltd, as well as certain other Irish mortgage assets, to an affiliate of Lone Star Funds, following on from last week's sale of specialist UK mortgage business Kensington Group PLC. Investec said the deal is part of its objective to simplify and reshape its specialist banking business, and reduce assets within its legacy non-core business.
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William Hill, Ladbrokes, Paddy Power and Gala Coral are creating a self-regulatory body to impose tougher standards on the industry as they seek to head off criticism about the rise of problem gambling, the Financial Times reports. Other gambling companies, including Betfred and Bet 365, have also been invited to sign up to the new watchdog, which will be launched in January, the FT says, adding that the new body has been dubbed the Senet Group, after a board game that was popular in ancient Egypt.
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AIM MOVERS
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Alexander Mining is the second best-performing stock on the AIM All-Share index after the mining company said it has signed an option agreement with an unnamed mid-tier mining company regarding its AmmLeach zinc processing technology. Reach4entertainment is up after it expressed confidence in at least meeting market expectations for the full-year, as it swung to a profit in the first-half of the year thanks partly to a strong performance in its New York operations. Sirius Petroleum is up after it signed an agreement with BTG Pactual Commodities regarding the marketing of crude oil from the Ororo Field and other marketable products from Sirius-owned fields. Beacon Hill Resources is the worst-performing stock after it raised about GBP1.3 million by placing 1.3 billion shares, money it will add to its existing cash resources to see it through to the end of the year when it hopes it will have arranged a new project expansion financing facility. Frontier Mining is also down after it said its pretax loss in the six months to June 30 was USD21.4 million, against a USD4.6 million loss a year earlier, due to a massive increase in the group's foreign exchange losses. Distil has seen almost a quarter of its value wiped off after the company said that a delay in securing regulatory approval for two distributors for its brands in the US means it will now "significantly" miss current market expectations.
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Top Economics And General
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The average asking price for a house in the UK jumped 0.9% on month in September, property tracking website Rightmove said, to GBP264,875. That follows the 2.9% contraction in August. On a yearly basis, house prices rose 7.9%, accelerating from the 5.3% gain in the previous month.
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The Eurozone trade surplus decreased for the second straight month in July, Eurostat reported. The trade surplus fell unexpectedly to a seasonally adjusted EUR12.2 billion, from EUR13.8 billion in June. The surplus was forecast to rise to EUR15.5 billion. Exports fell 0.2% from June after declining 0.3%. Meanwhile, growth in imports accelerated to 0.9% from 0.6%.
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Chinese industrial production and retail sales increased at slower than expected rates in August, data from the National Bureau of Statistics showed Saturday. The data has served to accentuate growth fears and expectations of additional stimulus as the world's second largest economy struggles to achieve the 7.5% growth target set for 2014. Industrial production rose 6.9% year-over-year in August following the 9% rise in July, with growth slowing for the second straight month and hitting its slowest pace in over 5 years. This was slower than the 8.8% growth estimated by economists. A separate report showed that Chinese retail sales expanded 11.9% year-over-year in August, which was slower than the 12.2% increase in July.
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UK Prime Minister David Cameron was set to hit the campaign trail in Scotland, in a last ditch attempt to persuade voters to say "no" to independence from the UK. With opinion polls showing that Thursday's referendum is on a knife-edge, Cameron is expected to tell Scots there will be "no going back" if they vote to end more than 300 years of union with the rest of the UK. Meanwhile Scottish First Minister Alex Salmond was also set to meet business leaders in a bid to highlight the economic opportunities independence could bring.He told the BBC at the weekend the vote was a "once in a generation opportunity for Scotland."
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Cameron vowed to "hunt down" the jihadists responsible for beheading a British aid worker, and France is hosting an international security conference on Iraq Monday as the US seeks more allies for a global coalition against the Islamic State. Cameron called 44-year-old David Haines a "British hero" and said his government would "hunt down those responsible and bring them to justice no matter how long it takes," after the extremist Sunni group released a video of the beheading.
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Ukraine and the EU are delaying the implementation of a much-touted free trade deal until the end of 2015, while Brussels and Washington on Friday slapped fresh sanctions against Moscow for its role in the crisis in eastern Ukraine. In announcing the trade deal delay, following concerns from Moscow that it will have negative repercussions, EU Trade Commissioner Karel De Gucht said: "This is part and parcel of the comprehensive peace process in Ukraine." Moscow, which is wary of closer EU-Ukraine ties, has expressed fears that the trade pact could negatively impact Russia's economy.
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Afternoon Watchlist (all times British Summer Time)

13:30 US NY Empire State Manufacturing Index
14:15 US Capacity Utilization
14:15 US Industrial Production
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Tuesday's Key UK Corporate Events

Craneware Full Year Results
Euromoney Institutional Investor Trading Update
Flowtech Fluidpower Half Year Results
Crest Nicholson Holdings Interim Management Statement
Galliford Try Full Year Results
Pan African Resources Full Year Results
ASOS Trading statement
IQE Half Year Results
Silence Therapeutics Half Year Results
Falkland Oil and Gas Half Year Results
Thomas Cook Group Trading Update
Lidco Half Year Results
N Brown Group Trading Statement
Porta Communications Half Year Results
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Tuesday's Key Economic Events (all times British Summer Time)

01:01 UK BoE Quarterly Bulletin
03:00 China FDI - Foreign Direct Investment
06:30 Japan Bank of Japan Governor Kuroda Speech
09:30 UK Consumer Price Index
09:30 UK DCLG House Price Index
09:30 UK Producer Price Index
09:30 UK Retail Price Index
10:00 EU Labour cost
10:00 Germany ZEW Survey
10:00 EU ZEW Survey - Economic Sentiment
13:30 US Producer Price Index
13:55 US Redbook index
14:00 US Total Net TIC Flows
14:00 US Net Long-Term TIC Flows
15:30 US EIA Crude Oil Stocks change

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