LONDON BRIEFING: M&C Saatchi caught between two unattractive offers

Writer,

The battle over M&C Saatchi took a strange new twist on Friday, as the London-based advertising agency rejected both of its suitors but also said it may not be able to deliver on its own plans as a standalone company.

M&C Saatchi said it no longer recommends that shareholders vote in favour of its takeover by Next Fifteen Communications, given a recent ‘deterioration in value of Next 15 shares’.

In May, digital marketing services firm Next Fifteen Communications announced it had reached an agreement with M&C Saatchi on a cash-and-shares takeover. It offered 0.1637 of a Next Fifteen share and 40 pence in cash for each M&C Saatchi share, valuing M&C shares at 247.2 pence each.

Since announcing the deal, Next Fifteen shares have fallen around 30%. This now means the Next Fifteen offer implies a value of 189p per M&C Saatchi share, the advertising agency noted on Friday. This puts it below the final offer from rival suitor AdvancedAdvT, currently worth 209.4p.

M&C Saatchi shares were quoted at 175.78p early Friday.

‘Based solely on financial terms, the M&C Saatchi directors consider each of the [AdvancedAdvT] offer and Next 15 offer to be inferior to M&C Saatchi's standalone prospects. However, if those standalone prospects were incapable of being delivered as envisaged, then the M&C Saatchi directors consider the Next 15 offer to be superior to the ADV offer and Next 15 to be the preferred future owner of the M&C Saatchi business,’ said M&C Saatchi.

The company said Vin Murria, the executive chair of AdvancedAdvT and until recently a member of the M&C Saatchi board, will - with AdvancedAdvT - continue to hold a 22.3% stake in M&C Saatchi.

The company said such a holding will allow Murria ‘to exercise significant influence over the company’, including ‘demanding changes of strategy’, which ‘can prove to be a significant distraction to the company, its management team and directors’.

‘Accordingly, the M&C Saatchi directors have no certainty that the standalone prospects will be capable of being delivered in the way that they currently envisage,’ it said.

M&C Saatchi was founded in 1995 by ad executives Charles Saatchi and brother Maurice Saatchi, who also were behind renowned ad agency Saatchi & Saatchi.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.2% at 7,032.46

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Hang Seng: up 1.0% at 21,059.60

Nikkei 225: closed down 1.8% at 25,963.00

S&P/ASX 200: closed down 1.8% at 6,474.80

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DJIA: closed down 741.46 points, or 2.4%, at 29,927.07

S&P 500: closed down 123.22 points, or 3.3%, at 3,666.77

Nasdaq Composite: closed down 453.06 points, or 4.1%, at 10,646.10

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EUR: flat at $1.0501 ($1.0509)

GBP: down at $1.2263 ($1.2311)

USD: up at JP¥134.40 (JP¥132.22)

Gold: up at $1,844.91 per ounce ($1,841.77)

Oil (Brent): up at $119.74 a barrel ($118.37)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Friday's key economic events still to come

1100 CEST EU consumer price index

1200 BST UK Bank of England quarterly bulletin

0915 EDT US industrial production & capacity utilization

1000 EDT US leading indicators

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The World Trade Organization concluded a landmark bundle of deals Friday covering fishing subsidies, food insecurity and Covid-19 vaccines following hectic round-the-clock talks. WTO director-general Ngozi Okonjo-Iweala said trade ministers had struck an ‘unprecedented package of deliverables’ which would make a difference to people's lives across the planet. The talks at the global trade body's Geneva headquarters began Sunday and were due to wrap up on Wednesday. But instead the WTO's 164 members went through two straight nights before getting the package over the line at around 0300 GMT Friday. The WTO's 12th ministerial conference reeled in a deal to halt harmful fisheries subsidies after more than two decades of negotiations, and also reached agreements on e-commerce, responding to pandemics and reforming the organisation itself.

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BROKER RATING CHANGES

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HSBC raises Inchcape price target to 970 (910) pence - 'buy'

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SocGen raises Hammerson to 'hold' (sell) - price target 21.8 (24.8) pence

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Morgan Stanley cuts Deliveroo price target to 164 (193) pence - 'equal-weight'

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COMPANIES - FTSE 100

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Tesco held its financial guidance as it took UK grocery market share in an inflationary environment. Retail sales in the 13 weeks to May 28 came in at £13.57 billion, up 2.0% on a like-for-like basis on a year and up 9.9% like-for-like against three years ago. In the UK, where like-for-like sales fell 1.5% on an annual basis, the grocer notched market share growth of 37 basis points. ‘Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market,’ said Chief Executive Ken Murphy. Amongst other Tesco divisions, wholesaler Booker saw annual like-for-like sales jump 19%, with Tesco saying this strong performance was driven by catering and the lapping of lockdowns. In central Europe, sales were up 9.0% on a year before, with 40 basis point of market share growth across its territories. ‘Although difficult to separate from the significant impact of lapping last year's lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment,’ said Murphy. Despite the challenging backdrop, Tesco left its full-year guidance unchanged.

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Miner and commodities trader Glencore said it expects its Marketing segment's half-year earnings to top $3.2 billion, being the upper end of its long-term adjusted earnings before interest and tax annual guidance range of $2.2 billion to $3.2 billion. ‘Our Marketing segment's financial performance has continued to be supported by periods of heightened-to-extreme levels of market volatility, supply disruption and tight physical market conditions, particularly relating to global energy markets,’ said Glencore, though adding that market conditions should normalise in the second half of the year. Turning to its Industrial coal business, Glencore said its February full-year portfolio mix adjustment guidance of $32.8 per tonne is expected to increase to a range of $82 to $86 per tonne for the first half. Glencore will release first-half production report on July 29 and its interim results on August 4.

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COMPANIES - FTSE 250

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Magazine publisher Future confirmed it is on track to meet full-year guidance after an ‘encouraging’ start to the second half continued. ‘The group continues to benefit from the effect of its diversified audiences and revenue streams, its operating leverage, excellent cash conversion and strong balance sheet,’ Future said. Additionally on Friday, Future said it has completed the acquisition of Who What Wear, a leading digital-only women's lifestyle publisher based in the US.

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AJ Bell late Thursday said it has promoted Deputy Chief Executive Officer Michael Summersgill to CEO, to replace Andy Bell, who will step down from the helm of the investment platform. Summersgill, who is also chief financial officer, will replace Bell as CEO with effect on October 1, while Bell will transition to non-executive deputy chair on the same date. AJ Bell said the move was in line with the board's long-established succession plan, with Summersgill being identified as a potential successor to Bell several years ago. Summersgill has held a range of executive responsibilities across the business. He will hand over the CFO role to Peter Birch on July 1. The company was formed in Manchester by Bell and Nicholas Littlefair in 1995.

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COMPANIES - SMALL CAP

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James Fisher & Sons said it has appointed former Smiths Group executive Jean Vernet as its new chief executive, effective September 5. Vernet has experience working in the offshore energy sector both in the UK and globally, James Fisher noted. He was most recently chief executive of Smith Group's largest division, John Crane. Current James Fisher CEO Eoghan O'Lionaird will step down in September, though will remain employed by the company until June 13, 2023, to ensure a smooth handover.

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COMPANIES - GLOBAL

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Banco Santander laid out its chief executive succession plans, naming North America head Hector Grisi as its new boss. Grisi will at the start of next year replace Jose Antonio Alvarez, who has been the Madrid-based lender's CEO since January 2015. Grisi is currently CEO of Santander Mexico and also leads the group's North America operations. He joined Santander in 2015. ‘Hector Grisi is a seasoned expert who knows our business and is the right person to lead the bank with [Executive Chair Ana Botin],’ Lead Independent Director Bruce Brown said. Alvarez will remain on the Santander board, taking on the role of non-executive vice chair. He joined Santander in 2002, became finance chief in 2004 before becoming CEO 11 years later.

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Friday's shareholder meetings

Blackstone Loan Financing Ltd - AGM

boohoo Group PLC - AGM

Directa Plus PLC - AGM

Tesco PLC - AGM

EnQuest PLC - AGM

Octopus Renewables Infrastructure Trust PLC - AGM

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