Market report: Thursday close
ABN Amro is not ruling out the possibility of megamergers taking place in the oil sector before long as the big blue-chip producers strive for cost savings.
It is among a growing band of brokers that believes we could eventually see a tie-up between Royal Dutch Shell, up 16p at 1691p, and BP, 6½p better at 554¼p, or even France's Total.
It has put a value on Royal Dutch Shell of 2150p, but says that figure could rise to more than 3000p if a merger becomes reality. The broker is also aware of the benefit to shareholders if the upstream part of the group were to be demerged.
Meanwhile, mining shares continued to make headway. They still have some way to run, according to Goldman Sachs. It has been upgrading its target price for some of the leading players. Top of its shopping list is BHP Billiton, 8p firmer at 1159p.
Share prices were a touch firmer but turnover levels remained at a low ebb as the financial year drew to a close. The decision by the Bank of England monetary policy committee to peg interest rates at 5.25% was greeted with a quiet sigh of relief by traders and investors. The FTSE 100 index was last up 32.6 at 6397.3.
Barclays was up 6p to 733p, with buyers giving for the call in the April 780p series of traded options. The exclusivity clause relating to the merger talks with ABN Amro runs out on 18 April.
Takeover speculation at Scottish & Newcastle, up ½p at 606½pp, boiled over after several brokers downgraded the shares. Dresdner Kleinwort has downgraded from hold to reduce with a target of 545p. ING hasmoved from hold to sell, although the target has been jacked up from 519p to 566p with the broker taking the view the market has been overly optimistic about a deal.
ING reckons S&N is overvalued, and that neither an industry buyer nor a private-equity company could extract value at the current price. It estimates the break-up value at 581p, but points out that any bidder would have problems with the competition authorities and its growth profile.
A merger with Carlsberg would generate the most value, and would solve Carlsberg's financial limitation issues. It could wait until cost savings and realestate valuations improve net debt.
Goldman Sachs also reckons S&N would glean little value from a merger but reckons the shares are underpinned at these levels. It has lifted its target from 520p to 565p.
Takeover speculation has been rekindled at bookie Ladbroke, up 11¾p at 418p. Private-equity outfit CVC is reckoned to have taken a look last year and may be expressing renewed interest. Almost six months ago, Ladbroke approached online gambler 888 Holdings, down ¾p at 125¼p, about a possible takeover. Ladbroke says the talks are continuing.
Life assurer Old Mutual, up 4p at 170.5p, has been upgraded from hold to buy by Citigroup with the target tweaked up to 188p. The US broker says that the risk/reward profile is starting to look more attractive, and adds that there is potential in further gains in equity markets.
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