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“It is encouraging to see the FTSE 100 start the new week with a firm push forward, rising 0.7% to 7,754 with notable gains from utility stocks and insurers,” says Russ Mould, investment director at AJ Bell.
DS Smith
“Packaging group DS Smith has proposed its second major acquisition in less than a year with a deal to buy Spanish rival Europac for £1.45n. This follows last summer’s purchase of an 80% stake in US business Interstate for £642m, plus last month’s deal to buy corrugated packaging company CCC.
“On one hand, DS Smith is using its strong position in the market to mop up competitors, increase its position in certain geographies and further strengthen its global supply chain.
“On the other hand, companies which frequently make acquisitions face various risks including the tough job of successfully integrating businesses, making sure they haven’t overpaid and achieving the synergies first touted when making each acquisition.
“Chief executive Miles Roberts recently said the packaging industry was ‘an exciting and fast-paced environment’. Investors will ultimately seek reassurance that DS Smith hasn’t been caught up in this market euphoria and isn’t rushing to make deals without proper due diligence and consideration for how it will create value in the future.”
CYBG / Virgin Money
“Normally if a company sweetens an existing offer for a rival the latter would see its shares move higher. This is not the case with banking firm CYBG’s modestly enhanced bid for Virgin Money today. Virgin actually sees its shares fall a bit and CYBG moves a little higher.
“As this is an all-share transaction, the decline in CYBG’s share price since it was first announced in May means this new offer is actually worth less to Virgin shareholders than the original approach, although they would own slightly more of the combined entity under the new terms.
“Management of both firms seem to be on board with the deal, but the lack of any cash element may become more of a talking point as we approach the 18 June deadline for a formal offer to be agreed.”
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