FTSE in-depth: Apax tipped for Smiths buyout

By GEOFF FOSTER FOR MAILONLINE
Updated: 03:00 EDT, 20 May 2011

Private equity vultures have been hovering above Smiths Group for months.

Geoff Foster: Event of the day was the long-awaited debut of controversial Glencore.

The board in January rejected a £2.45bn bid approach from Apax for its medical devices business, saying the deal was not 'in the interests of shareholders'.

Four months later it warned that the second-half performance of its Detection business, which makes X-ray scanners used at airports and accounts for almost 20pc of sales, had fallen short of expectations due to continued delays in orders.

The shares plummeted 6pc in one nervy session and this increased speculation that Apax and 'friends' could launch a full-scale cash offer for the engineering and technology group.

Rumours of a £7.8bn or £20 a share breakup bid certainly whetted punters' appetites yesterday and they chased the stock 38p higher to 1249.5p.

Ever since dealmaker Philip Bowman became group chief executive in September 2007, dealers have been expecting fireworks. He sold drinks giant Allied Domecq to Pernod Ricard for £7.65bn and whilst at Scottish Power agreed its sale to Spain's Iberdrola. Smiths Group would make a spectacular hat-trick.

Supported up to 375p recently on a Credit Suisse note suggesting its banking and treasury capital markets business could make it an attractive takeover target, Misys met with revived speculative support. It touched 360.5p and closed 2.6p better at 357.05p. Any offer would have to get the agreement of US activist investor, ValueAct, which sits on 20pc of the equity.

Analysts point out that the Misys business is much more focused following the disposal of healthcare software joint venture Allscripts and the November acquisition of Sophis has helped create a market leader in capital markets software which could attract the attention of a leading US bank such as Citicorp.

Elsewhere, the major event of the day was the long-awaited debut of controversial commodities trader Glencore. Floated at 530p, the shares raced ahead to 553p in conditional trading before retreating to finish only a penny firmer at 531p. The stock will be fully listed on Tuesday and the group is expected to replace engineer Invensys (9.6p off at 299.65p) in the Footsie. Valued at £36.7bn, Glencore is the biggest ever IPO in London.

Wall Street rallied 45.14 points to 12605.3 despite news that Philadelphia's Fed's business activity index slumped to 3.9 in May from 18.5 in April. The Conference Board's index of leading indicators slipped 0.3pc in April from a 0.7pc gain in March. Goldman Sachs also downgraded tech giant Intel to sell.

Following the 37pc collapse since early March, broker Sanford Bernstein advised clients that broadcaster ITV now looks heavily oversold. They switched on and the close was 2.7p brighter at 69.725p, still 27pc below the year's high.

Bob Diamond's Barclays advanced 6.75p to 277.475p after Berenberg Capital Markets upgraded to buy from hold, describing the bank as the cheapest in the UK and one of the cheapest in Europe.

Further consideration of chief operating officer Mark Yallop's surprise departure and sale of 120,000 shares at 490.4167p dragged the world's largest interdealer broker ICAP 15.2p lower to 473.85p.

Specialist engineer services provider Lamprell jumped 33.8p to 385.55p after analysts gave the thumbs up to its agreed £209m offer for Maritime Industrial Services, the diversified engineering and contracting group focused on the energy sector and based in the United Arab Emirates and Sharjah.

Nigeria focused oil explorer Afren gushed 8.2p to 156.55p following a bullish update on its Ebok field.

Takeover favourite Encore Oil rallied 4.25p to 70.5p after RBC Capital Markets reiterated its outperform rating and 100p price target which is what it believes a larger North Sea developer would be willing to pay for Encore's stakes in the Catcher area and Cladhan developments.

Talk of a sizeable placing of stock in 3i Infrastructure left the close 2.7p cheaper at 119.45p. Mike Gilligan, head of research at Killik, suggested that the seller is Hermes, which manages the BT Pension scheme.

3iN is the broker's preferred play in the listed infrastructure space compared with more PFI-focused peers which are trading on significant premiums.

Photographic equipment supplier Vitec closed flat at 618.5p despite saying it expects full-year results to be ahead of expectations. Altium Securities is a buyer and raised its pre-tax profit estimate to £30m from £29.7m.