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Sainsbury's bags Home Retail, miners drag FTSE

Sainsbury's shares rally as supermarket handed clear run at Home Retail takeover following Steinhoff's withdrawal from the race.

 
Sainsbury's bags Home Retail, miners drag FTSE

Sainsbury's and drugs companies helped offset falls in miners as the FTSE 100 got off to a tentative start to the week.

Sainsbury's (SBRY) rose 1.1% to 276.3p after the supermarket was given a clear run to buy Argos owner Home Retail Group following rival suitor Steinhoff International's withdrawal from the race.

Steinhoff's announcement on Friday removed the prospect of an expensive bidding war. Sainsbury's responded by announcing a firm cash and shares offer valuing Home Retail shares at 173.2p, on the same terms as its earlier bid.

Shares in Home Retail (HOME) rose 1.2%, recouping some of the losses made on Friday as the prospect of a bidding war faded.

James Grzinic, analyst at Jefferies, remained cautious on the benefits of the deal, rating the supermarket's shares a 'hold'.

'This is a helpful dynamic for the group as it provides a potentially meaningful source of new earnings (with synergy targets now upped to £160 million) at a time when the outlook for the core business remains uncertain,' he said.

'Still, we lack the elements to conclude that this delivers materially enough upside for a more active stance.'

Pharmaceutical stocks were also in the ascendancy, particularly Shire (SHP) the top riser, up 4.2% at £38.46.

Miners meanwhile fell into the red as the price of copper fell from a four-month high, dragged down by a stronger dollar following weakness last week. Dollar strength typically hurts commodities as they are priced in the US currency.

That left the FTSE 100 nine points, or 0.1%, weaker at 6,181.

Antofagasta (ANTO) fell 3.7% to 495p and BHP Billiton (BLT) closed 1.6% lower at 817.4p.

Among 'mid cap' stocks, Synthomer (SYNTS) was the top riser, up 5.6% at 345p, as investors welcomed a deal to buy US-based Hexion Performance Adhesives & Coatings for $226 million (£157 million).

McCarthy & Stone (MCS) jumped 5.2% to 249p as analysts at HSBC initiated coverage on the house builder with a 'buy' rating.

Halfords (HFD) was the biggest faller, down 5.3% at 401p after analysts at UBS cut their rating on the stock to 'sell' from 'neutral' as it adopted a more bearish stance on UK retail stocks due to the risk of a UK exit from the European Union.

That stance also led UBS to cut its target on clothes retailer N Brown (BWNG) to 'neutral' from 'buy', sending the shares 6% lower at 337.6p.

Investment trusts were among the big movers on the FTSE Small Cap index. Ranger Direct Lending (RDL ) jumped 4.5% to 958.5p, having fallen to their biggest-ever discount to net asset value, at 14.5%, on Friday. The biggest faller on the index was Scottish Oriental Smaller Companies (SST ), down 1.7% at 757p.

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Investment Trust Watch: my Scottish tip for 2017

by Gavin Lumsden on Dec 09, 2016 at 16:10

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