FTSE live: Recovery hopes after China Evergrande shock as National Express and Stagecoach unveil merger
he FTSE 100 index has rebounded after Monday’s turbulence, with another big rise for airline giant IAG and a strong session for Royal Dutch Shell helping to offset the contagion fears triggered by the plight of debt-laden Chinese property firm Evergrande.
There’s also more merger and acquisition activity after National Express and Stagecoach confirmed talks over a potential tie-up, while interim results from B&Q owner Kingfisher have included plans for a £300 million buyback and higher dividend. A surprise bid for Entain from US fantasy sports group DraftKings has provided some afternoon excitement.
Ladbrokes owner Entain surges on surprise $20 billion bid
It’s a bid day for deals. First Stagecoah and National Express, then BT’s possible DAZN transaction, now a possible Entain takeover.
Shares in Ladbrokes owner Entain have surged 15% after the gambling group received a takeover bid from US fantasy sports firm DraftKings.
“There can be no certainty that any offer will be made for the Company, nor as to the terms on which any such offer may be made,” the company said. “A further announcement will be made as and when appropriate. Shareholders are urged to take no action at this time.”
The brief statement followed a report by CNBC breaking news of the approach. CNBC said the offer was worth $20 billion.
Shares in Entain jumped 15% following the report. Entain was valued at £12.9 billion ($17 billion) prior to the spike.
Here are the main stories in the market this lunchtime:
– The FTSE 100 is up 86 points, or 1.2%, to 6990. The index is rebounding from a sell-off on Monday driven by fears that Chinese real estate giant Evergrande could default on its $300 billion debt pile. Concerns about possible global contagion have eased slightly.
DAZN, a startup backed by billionaire Sir Leonard Blavatnik, is in “advanced” discussions to buy BT Sports and a deal could be announced within weeks, the Financial Times reported. The story sent shares in BT climbing 2.7% in London.
The deal would be a significant coup for DAZN, a London-founded startup that has been called the ‘Netflix of sport’ in the press. DAZN offers subscription sports streaming services and has made its name in combat sports like boxing and UFC, as well as NFL. Despite being founded in London, the company has a smaller footprint in the UK than in North America.
A deal to buy BT Sports would significantly expand DAZN’s reach in Britain and hand the company rights to Premier League matches.
The world may be in the midst of a microchip shortage but that hasn’t stopped Alphawave coining it.
The Canadian chip designer, which listed in London in May, today reported surging half-year sales and revenues and upgraded full-year forecasts. Bookings surged 490% to $196.1 million (£143.3 million) and revenue jumped 140% to $27.6 million.
Alphawave, which designs chips and then licenses them to manufacturers, said it was seeing a boom in demand due to ever increasing connectivity. Its chips are going into data centers, 5G networks and cars, among other things. CEO Tony Pialis called it a “breakout period” for the company.
Executive chairman John Holt said the ongoing global microchip shortage was an “opportunity” for the company as it was leading to investment in new factories to meet demand. That in turn was helping to fill order books.
Profit dipped 36% to $2.7 million as IPO costs hit the company’s bottom line. Alphawave upgraded its forecast for full year revenue growth by 25% to 125%. Shares in the business rocketed 40.6p, or 11.9% to 382.20p.
British Steel’s shutdown warning as gas price mayhem boils
British Steel today issued a stark warning over power prices “spiralling out of control” as the gas crisis swept across the UK economy.
The nation’s second-biggest steel producer said the colossal hikes — up 50-fold from £50 per megawatt-hour to £2500 per MWh since April — are making the power-hungry production process impossible at certain times.
“With winter approaching, when demand will rise, prices could get significantly worse,” the company said.
British Steel, owned by Chinese conglomerate Jingye, said it was maintaining production at “normal levels” for now but the spike in costs could not be “absorbed or ignored.”
Stagecoach takeover makes sense for both companies
The surge in both Stagecoach and National Express’ share prices today shows that the City sees value in this deal on both sides.
Both businesses operate large fleets that could benefit from shared servicing. Both need to invest large sums to get ready for the Net Zero future. A combined balance sheet offers more borrowing power and heftier buying power.
In many ways, what’s surprising is that this deal hasn’t happened sooner. Stagecoach first tried to buy National Express in 2009. Activist investor Elliott advocated for a merger at National Express three years later. It’s been a coy dance ever since.
The one thing that could burst the tyres on this deal is the competition watchdog. A deal with this much impact on the UK’s transport infrastructure will no doubt be scrutinized closely.
Shares in Stagecoach jumped over 20% after confirming it was holding merger talks with rival National Express.
Both companies said in separate statements that they were engaged in talks about a possible all-share combination that would see National Express subsume Stagecoach. Deal talks were first reported by Bloomberg.
National Express is offering Stagecoach shareholders 0.36 shares in National Express for every Stagecoach stock they hold, which would give Stagecoach investors 25% of the combined business. The offer represents a premium of around 18% based on Monday’s closing price.
Shares in both businesses jumped in early trading, valuing the Stagecoach bid at around £480 million.
The boards of both companies said the deal would be “strategically compelling”, promising cost savings, growth, and value for both sets of shareholders.