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FTSE firm as merger mania dominates UK shares

Takeovers enliven UK stock market with Virgin Money jumping 8% on bid from rival challenger bank CYBG. Scottish Mortgage Trust extends recent rally.

 
FTSE firm as merger mania dominates UK shares

(Update) A rash of merger and takeover developments enlivened the UK stock market today with Virgin Money jumping 9% on a bid from rival challenger bank CYBG, Shire finally succumbing to a fourth bid offer from Japan’s Takeda while Comcast of the US formally entered the bidding for pay-TV group Sky.

CYBG (CYBG), the owner of Clydesdale and Yorkshire Bank gained 3p or 1% to 321p after unveiling an all-share offer for Virgin Money (VM) that valued the Richard Branson-backed lender at £1.6 billion.

Virgin, held by both Jupiter UK Growth and Standard Life Investments UK Equity Income Unconstrained funds among others, spiked 28.6p to 341p, one of the biggest risers on the ‘mid-cap’ FTSE 250. Its board said it was reviewing the proposal which would see the bank’s shareholders get 1.1297 of CYBG shares for each of their shares and own 36.5% of the combined group.

CYBG said it would keep the Virgin Money brand, adding it hoped it would ‘play a significant role in the combined group’. With six million personal and business customers the group would be the largest of the so-called new ‘challengers’ to the big four big high street banks.

Shares in Metro Bank (MTRO) and OneSavings Bank (OSBO) gained nearly 3% and 3.7% respectively as the bid raised the prospect of further consolidation in the sector.

‘There can be no certainty either that an offer will be made nor as to the terms of any offer, if made. Accordingly, shareholders are advised to take no action in relation to this proposal,’ Virgin Money commented.

Meanwhile Shire (SHP) gained 4.7% or £1.82 to £40.38, the biggest riser on the FTSE 100, after the drugs company accepted a fourth improved offer from Takeda of £46 billion ($62.42 billion), with a raised cash component of $30.33 billion.

Sky (SKYB) shed 1.8% or 25p to £13.47 as US cable operator Comcast notified the the European Commission of its intention to bid for the pay-TV group which it is competing with Rupert Murdoch’s Twenty-First Century Fox to buy.

Fox, which wants to buy the 61% of Sky it does not own, is expected to raise its original offer of £10.75 a share after Comcast stunned the broadcasting sector with an indicative offer of £12.50 a share last month.

Back on the FTSE 250, FirstGroup (FGP) was the biggest ‘mid-cap’ faller, skidding 12.5% or 14p to 96.8p after US private equity firm Apollo Global Management said it did not intend to make an offer for the British bus and rail operator.

The pound continued to trail on currency markets, extending the weakness of recent weeks to trade at $1.3524 to the dollar as investors bet the Bank of England would hold interest rates again this week.

The FTSE 100 edged up a point to 7,568 but the FTSE 250 did better, gaining 0.8% or 156 points to 20,578. The FTSE Small Cap indexadded 25 points or 0.4% to 5,926.

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4 comments so far. Why not have your say?

Novgorod

May 08, 2018 at 17:23

Rapid M&A activity is often a sign that a bull market is nearing its end - whether such rules still apply in this weird environment of distorted monetary policy and fragmentation is hard to know.

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Peter in Cornwall

May 08, 2018 at 18:03

I thought it was the other way round and that M&A activity was usually towards the bottom of the cycle when equities were cheap. But as you say Novgorod, who knows in this unpredictable economic and political environment.Anything goes?

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Paul Hutchings

May 08, 2018 at 20:17

Can’t say I know either way but Peter in Cornwall.....

I hope your right !!

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Hank Elvis Dobbs (texan)

May 09, 2018 at 19:12

I'm amazed the market hasn't flown..I mean just look at the returns on equities compared to everything (everything ) else....Penny will drop soon

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