FTSE in-depth: Rumours rife of JLT takeover

By GEOFF FOSTER FOR MAILONLINE
Updated: 04:48 EDT, 21 October 2010

And the next one please. Consolidation among the Lloyds' insurers is gathering pace, and the hot money is going on Jardine Lloyd Thompson as being the next to lose its independence.

Geoff Foster: Dealers heaved a huge sigh of relief that the long wait for the Comprehensive Spending Review was at last over

Shares of the London-based broker were chased up to 604p, before closing 16p better at 597p amid talk of a £1.7bn, or £8 a share cash bid from US giant Marsh &; McLennan.

Earlier this year rumours were rife that Aon - the world's biggest insurer which paid £844m for Benfield in 2008 - was stalking JLT.

Dealers heard whispers that Marsh & McLennan had even reached agreement with Silchester, the investment company, to acquire its 16% stake in JLT. It also did not get shown the door when it approached Far-Eastern giant Jardine Matheson to name a price for its 30.2% shareholding. An offer in the region of £8 a share would surely be hard for any shareholder to reject.

Eamonn Flanagan, analyst at broker Shore Capital, said in a note to clients: 'The gloves are off and the often mooted, long threatened consolidation story amongst Lloyds' insurers is firmly back on the agenda.'

He advises clients to buy Hardy Underwriting Bermuda (5.25p better at 296.5p) following the board's strong rejection of Beazley's (flat at 117.3p) indicative approach, pitched at £3 a share.

Flanagan believes the offer significantly undervalues Hardy's track record in which it has not made an underwriting year of account loss since formation in 1975. Beazley will have to offer between 380p and 400p a share to stand a decent chance of success.

As dealers heaved a huge sigh of relief that the long wait for the Comprehensive Spending Review was at last over, the Footsie closed 25.04 points higher at 5,728.93. Chancellor-Osborne's swingeing, deficit-busting cuts generally got the thumbs up although it was no surprise to see them have only a limited effect on markets. Most of the cuts will not be implemented until next year and will take place over the next five years.

It was nevertheless reassuring to hear economist Howard Archer, at IHS Global Insight, say that he did not expect the spending cuts to push the UK into a 'double dip' recession.

Wacky Wall Street buoyed London by clawing back 132 points of its previous day's 165 point decline in early trading. Continuing speculation that the Federal Reserve will early next month pump more cash into the world's biggest economy, and impressive third-quarter earnings performances from Boeing and Yahoo! sparked the strong rally.

Investment bank Morgan Stanley, on the other hand, reported a third-quarter loss of $91m, compared with a profit of $498m last year. The giant securities house had to write down $229m the value of a stake in Revel Entertainment, an Atlantic City casino project.

Replacement hip group Smith & Nephew skipped 17.5p higher to 568p after US peers Stryker and Johnson & Johnson wheeled out positive third-quarter figures.

Green lights flashed for bus and rail companies after Osborne revealed the coalition government would invest more than £30bn on transport projects over the next four years. Docklands bus and SouthEastern rail group operator Go Ahead accelerated 88p to 1227p, while FirstGroup, which runs First Capital Connect trains, advanced 24.2p to 398.17p. Bus and coach company National Express rose 11.1p to 242.17p. And Forth Ports steamed 57p ahead to 1335.04p.

Social housing and geriatric care group Mears eased 2p to 284.75p, but Investec says buy. Analyst Guy Hewett reckons the £2bn of additional funding for Social Care supports demand for its care business, and the emphasis on energy companies providing measures to combat fuel poverty bodes well for its recent tie-up with British Gas.

Ashtead, the industrial equipment rental group, rose 5.4p to 121.2p. Buyers climbed aboard after seeing forecast-beating figures from US peer United Rentals. News that the US Architects Billings Index has gone into positive territory for the first time since January 2008 didn't do sentiment any harm either.

Excited by news of Dana Petroleum founder Tom Cross's appointment as chairman, buyers piled into Parkmead, 1.4p higher at 3p. Cross owns 28% of the company which provides advisory services to governments and companies which have small investments in oil and gas ventures. He hopes to replicate the super success he achieved at Dana, the oil group he founded and ran before selling out recently to Korea's KNOC in a £1.7bn deal.