BG gains on takeover speculation
In the week since losing its chief executive, BG Group has jumped nearly 11 per cent.
Goldman Sachs analysts on Tuesday were adding to speculation that BG has become vulnerable to a takeover approach since CEO Chris Finlayson quit, having fallen out with the board over the pace of potential disposals.
“BG’s attractions make it a key strategic asset,” Goldman told clients. “While we believe BG’s board is focused on value delivery through asset transactions, we also believe the current low rates environment at a time of global economic recovery is likely to encourage large M&A.”
Using expected 2017 returns, Goldman calculated that BP, Total, Shell and Exxon could all justify paying up to £18 a share for BG. A deal at £15 a share would become affordable for BHP Billiton and Chevron, it said.
Goldman set a £15.30 price target on BG, which climbed 1.2 per cent to £12.66.
Barclays led the wider market lower after its quarterly results showed much weaker than expected investment bank revenue. The FTSE 100 lost 0.4 per cent or 23.86 points to 6,798.56, with Barclays losing 5.2 per cent to 245p.
AstraZeneca lost 2.7 per cent to £46.78 after setting out long-term targets as part of its case to remain independent. The new guidance implied revenue growth of 10 per cent a year between 2017 and 2023, which analysts dismissed as overly optimistic given the lack of trial data for key drugs.
Shire slipped 3.1 per cent to £33.59 a day ahead of results from US peer Allergan, which has been widely rumoured to have considered merging with Shire as a takeover defence.
Hikma Pharmaceuticals edged 0.8 per cent higher at £15.87 as speculation continued that the generics specialist may be a target for sector peer Mylan.
A third profit warning in two years sent Balfour Beatty tumbling 20 per cent to 228.6p, with the engineering contractor also putting its Parsons Brinckerhoff division up for sale. The resignation of chief executive Andrew McNaughton stoked fears of a dividend cut once a replacement is found.
Rentokil added 2.6 per cent to 124.5p on an upgrade to “buy” from Merrill Lynch. “Rentokil has come to the end of a long period of restructuring, catch-up investment and distractions from non-core businesses,” it said. “The group has learnt from Bunzl and Berendsen, both of which have created significant value despite operating in relatively mature markets.”
Housebuilders rallied, with Barclays recommending the sector as oversold. Persimmon rose 3.8 per cent to £13.78 and Barratt was up 1.9 per cent to 382.3p.
Xcite Energy climbed 28.6 per cent to 82p after the North Sea explorer signed a collaboration agreement to share technical data for its Bentley field with Statoil and Shell, owners of the geologically similar Bressay field. Statoil has long been considered the most likely partner to help fund Xcite’s field through full development.
Chariot Oil & Gas rose 1.3 per cent to 20.3p, with Bernstein Research speculating that the African explorer would make a sensible takeover target for Galp. |
