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31 July 2015
Things really hotted up in Mergers & Acquisitions (M&A) this week with 6 high-profile announcements involving well known UK-listed UK Index stocks. This marks an acceleration into month-end and suggests renewed corporate optimism in being able to acquire growth at still favourable pricing. The share price moves that followed also emphasise the attractive premiums that tend to be paid (typically 20-30%) and the potential benefits from investing/trading in shares that have been subject to historical speculation or already had deals go sour. Below we look at two of the more interesting stories.
On Monday GVC Holdings (GVC) upped its bid for online gaming company Bwin.Party Digital Entertainment (BPTY; ) from 110p to 122.5p/share. However, with BPTY having already agreed (17 Jul) to a tie up with 888 Holdings (888) at 105-110p, will it accept this fresh GVC offer or use it as leverage to get more out of 888? BPTY shares are currently trading 2015 highs 115p, +28.6% since the company first said it was in talks with interested parties in mid-May. Up 5.6% this week alone, the shares sit between two competing bids. Which way will the company and its shares go?
Among the blue-chips, we had Swiss major Zurich Insurance (ZURN) on Tuesday confirm interest in RSA Insurance (RSA; UK 100 ) which sent shares in the long-time underperformer and victim of both scandal and profits warnings up 18% to hit 20-month highs 520p on hopes of more sector consolidation in an ever-tougher regulatory environment. Clarification from ZURN came in response to media speculation of it weighing up a bid which had already seen RSA shares deliver a 15% bounce from 8 July lows. Are the Swiss looking to get in at ground level to a turnaround story directed by ex-RBS boss Stephen Hester? Will any official bid still involve a premium over the current share price? ZURN has 4 weeks to make a move. Will further developments see the shares rally or slide?
While the above stocks might not be on your radar as the most exciting, I’m sure you’ll agree that the speed and magnitude of the share price moves this week most definitely are. After all, we’re here to spot opportunity and make money. How it’s delivered should be by the by. Keep an eye on our Mergers & Takeover Corner for who could be next.
Mike van Dulken, Head of Research
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
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