Banks may be turning off the cheap credit tap for private equity-led buyouts but that may only give way to a wave of old-fashioned takeovers.
That is the word on the street among corporate financiers and City lawyers, who pointed to yesterday’s agreed $38.1 billion (£18.8 billion) offer by Rio Tinto for Alcan to create a mining and aluminium colossus.
Rio, down 183p to £38.10, led the fallers on the FTSE 100, as investors came to grips with the generosity of its all-cash offer worth $10 billion more than a rival pitch from Alcoa.
The deal, financed by a $40 billion bank credit facility, triggered a frenzy of interest in mining stocks as hopes were rekindled of further sector consolidation.
Prices of base metals such as copper, zinc and aluminium have soared over the past five years and are set to continue their ascent according to a broker note from JPMorgan, as the emerging Chinese and Indian markets continue to eat up raw materials to fuel economic growth.
Advertisement
Vendanta Resources added 109p to £18, a near-6.5 per cent rise, making the miner the highest climber in the FTSE 100.
The other big miners followed, led by Antofagasta, up 43p to 715½Xstrata, 153p to 3427p £34.27, Kazakhmys, 53p to £14.23, Lonmin, 150p to £43.50. BHP Billiton, which bought back some shares, rose 60p to £15.54.
Gains in UK mining stocks, coupled with a mid-session surge of more than 180 points in the Dow Jones index of leading US shares, left the FTSE 100 up 82.6 points at 6,697.70.
Admiral’s decision to pull the sale of a minority stake in its Confused.com insurance price comparison site wiped 3.4 per cent off its market value. The shares fell 28p to 862p. Admiral blamed demands private equity buyers were making on boardroom control.
Compass, the caterer whose Scholarest division supplies thousands of schools with meals, may be in for harder times. The Local Authority Catering Association was expected to say that total secondary schools meals uptake has fallen to the lowest level since 1944. Compass fell 2½.
Advertisement
Commercial property stocks have beaten a retreat amid concern that prices of retail and secondary office stock are in decline. The concern has been exacerbated over the past week as a slew of the UK’s big commercial property unit trusts have been cutting the value of their assets in response to increasing numbers of their investors trying to sell out of the funds. Shares in Hammerson, the property group, had been propped by takeover talk. But those whispers have died down, allowing wider fears in the general market to catch up. Hammerson fell 12p to £13.55, a new low for the year.
Liberty International, the shopping centre owner, fell 8p to £11.23. Its shares touched £13.97 at the start of the year.
Property agents at King Sturge calculate that new industry standards for energy-efficient buildings will mean that many investments could lose up to 12 per cent over the coming years while stock in the region could see values slide by up to 28 per cent.
Land Securities has been trying to diversify beyond offices and retail development into outsourcing and PFI contracts via its Trillium arm. Trillium said yesterday that it was paying Amec £163.5 million for its interest in nine PFI projects. Land Securities gained 8p to £17.23.
British Land bought back 750,000 shares at £13.65, believing the discount to net asset value is overdone. The shares gained 14p to £13.63.
Advertisement
— New York: Wall Street soared, propelling the Dow Jones industrial average to a record high as bright spots among generally sluggish retail sales allowed investors to shed concerns about the US economy’s health. The rally, which included the Dow’s biggest one-day gain in more than four years, came despite the absence of any extraordinary announcement or other catalyst. The Dow closed up 283.80 at 13,861.70.