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magazineTakeovers, disposals and clampdowns
A flurry of corporate news is keeping investors on their toes in the run up to Christmas. Profit warnings, takeovers, regulatory crackdowns and asset sales have dominated the stock market agenda over the past few weeks.
Takeover time
The most substantial development is the £18.5bn takeover approach from 21st Century Fox (FOX:NYSE) for pay-TV giant Sky (SKY).
Also in the media sector, the recently appointed chief executive of Daily Mail & General Trust (DMGT) Paul Zwillenberg has made his first big strategic move. He’s reduced the newspaper publisher and business information firm’s stake in Euromoney Institutional Investor (ERM) from 67% to 49% and netted £315m for DMGT in the process.
Investec analyst Steve Liechti sees several benefits to the deal for Euromoney: ‘1) Greater strategic autonomy; 2) Financial flexibility from a decoupled balance sheet; 3) Allowing an increased dividend pay-out ratio; 4) A more diversified investor base and improved liquidity in the shares.’
Commodities business Glencore (GLEN) has brought its own divestment programme to a close and has splashed out in partnership with Qatar’s sovereign wealth fund to buy a 19.5% stake in Russian state oil firm Rosneft.
The joint venture is paying $11.3bn for the stake. Glencore is putting up €300m and offering a further €1.4bn in margin guarantees, offering protection to a consortium of lenders against a large fall in the value of the Rosneft shares.
Regulatory risk
There was a harsh reminder of the risks of being invested in companies with significant exposure to regulation. Trading platforms CMC Markets (CMCX), IG (IGG) and Plus500 (PLUS:AIM) saw significant share price declines after the relevant authorities in the UK and Cyprus announced a crackdown on contract for difference (CFDs) products.
The Financial Conduct Authority (FCA) wants to impose a limit of 1:25 leverage for retail clients with less than 12 months’ experience. Secondly, the regulator wants a cap of 1:50 for all clients. The FCA notes that some CFD providers offer leverage in excess of 1:200. If enacted this could have a severe negative impact on the sector’s earnings.
The gambling sector is facing its own regulatory challenge after a cross-party group of MPs said maximum stakes on fixed-odds betting terminals should be cut from £100 to £2. That would have a negative impact on earnings for bookies with high street shops.
It is the latest in multiple efforts to reform the industry in recent years and this has led to a wave of consolidation. In the latest chapter in this story, reports are linking GVC (GVC) with a potential £3.2bn bid for Ladbrokes Coral (LCL). (TS)
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