FTSE in-depth: Smith & Nephew shares prove hip
Shooting from the hip, punters piled into Smith & Nephew amid industry gossip that the long-awaited bid is at last on the agenda before Santa comes down the chimney.
Taking stock: Extension of Bush-era tax cuts in US helped markets on Tuesday
Shares of the maker of false knees and hips - which has helped thousands of oldies get their dancing shoes on again - advanced to 609p before closing 11p better at 607.5p amid speculation of a £7.1bn, or £8-a-share, cash offer from a US consortium of private equity players.
Smith & Nephew has been in the takeover frame for donkey's years. US rivals Zimmer and Stryker Corporation along with Johnson & Johnson have forever been mentioned as possible bidders.
But with cash apparently coming out of their eyes, private equity groups across the Pond are now ready to swallow the last remaining top international medical supply group, which has been stepping up its marketing in the US, helping trading profits and revenues in the three months to October rise by 4%.
Broker Killik says the long-term outlook for the group is positive. Its markets are expected to generate mid-single digit volume growth, driven by ageing demographics, more-active lifestyles, the increase in diseases such as obesity and diabetes, and growth in emerging markets.
Speculators also filled their trolleys with Sainsbury on revived mutter from the gutter that Qatar Holdings, which still holds 26% of the third biggest supermarket group's equity following a failed £6 a share takeover bid in 2007, is lining up a knock-out bid before the new year. The shares touched 377p in active trading on talk of a £8.4bn, or 450p-a-share, cash bid before closing 15.3p better at 372.9p on turnover of almost 11m shares.
The Qataris, who have been big buyers of prestige UK property this year, have obviously kept their stake in Sainsbury for a reason. Sources suggest they will not walk away and it is just a matter of if, not when, they table a mouthwatering offer that the ageing Sainsbury family will find it hard to resist.
The juicy prospect of increased merger and acquisition activity and news of President Obama's US tax breaks helped the Footsie race ahead and touch 5,850 before closing 38.17 points higher at 5,808.45. Wall Street rose 79 points in early trading after Obama had announced that tax cuts put in place during the Bush era will remain for another two years, renewing tax cuts for both the middle class and wealthy high earners.
The Footsie looks set for its traditional pre-Christmas rally. Richard Hunter, head of equities at Hargreaves Lansdown, certainly hopes so. His 2010 year-end forecast was 6,000 and barring any shocks in the last few weeks of 2010, his 2011 year-end target is 6,500. Hunter says defensive companies should participate in a global recovery whilst being relatively unaffected by the onset of either inflation or deflation.
Pension and investment experts Hargreaves Lansdown jumped 16p to an all-time high of 519.5p. Now valued at about £2.5bn, the thriving company has promotion to the Footsie next year in its sights.
Meanwhile, industrial engineer IMI advanced 34p to a peak of 948p as tracker funds filled their boots with stock on expectation that the FTSE Steering Committee will today confirm its entry into the Footsie elite next week. Hoping for a last minute reprieve, African Barrick Gold put on 34.5p to 600.5p.
Acquisitive insurer Resolution rose 11.4p to 216.5p on reports of a pending upbeat circular.
Household goods giant Unilever rose 53p to 1900.76p after Morgan Stanley upgraded to overweight from underweight and lifted its target price by £4 to £23.
Shamed Desire Petroleum was sold down further to 56.25p before closing 6.25p off at 61.25p. Dealers say that the FSA and not just junior stock market AIM should investigate the potentially misleading comments the company made last week about drilling in the Falkland Islands. One day it said it had struck oil, the next it was found to be water and the well is to be plugged.
Inter-dealer broker ICAP lost 9p to 518.7p after Michael Spencer sold 6m shares at 512p a pop, trousering £31m. Never a good sign for investors.
TUI Travel gained 4.9p to 235.6p, seemingly unaffected by events at Sharm-el-Sheikh, where deadly shark attacks have spooked tourists.
Northgate, the white van man rental group, accelerated 18.75p to 234.5p on better-than-expected interim results. Pretax profits rose 24p to £27.2m and net debt was cut by £18.7m to £579.6m. Chairman Bob Mackenzie said the reorganisation of both the UK and Spanish businesses is on track.
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