Shire is back in the spotlight on continuing bid hopes and a cash boost from Canada.
As reports suggest potential bidder AbbVie intends pressing its $46bn takeover attempt again this week, the Dublin-based pharmaceutical group announced it had been told it was entitled to a $410m tax credit from the Canadian authorities.
It has already received $248m and expects the rest later this year. It said:
Shire intends to use the cash receipts to repay debt, providing Shire with increased capacity to invest in focussed business development activities.
The news has helped lift its shares 75p higher to £46.45.
Overall the FTSE 100 has edged up 3.17 points to 6760.94, following a strong performance overnight from Asian markets. Rebecca O'Keeffe at Interactive Investor said:
Equities are on track for their fifth straight month of gains as investors continue to shrug off market concerns and carry on embracing risk. However, the current lofty market levels are creating concerns that global central banks are storing up dangerous risks of excessive leverage as they pursue overly stimulative policy for too long. The key question is whether central bank policy has created an unrealistic environment which is allowing investors in both equities and bonds to ignore risk?
As signs emerge of more control being exerted by the army in Iraq, oil prices are starting to fall. The situation is still tense, but with ISIS insurgents having made no significant progress towards the oil fields in the south, markets are reducing the risk premium that had been built into the oil price over the past few weeks.
But housebuilders have slipped back on fears of curbs on mortgage lending, with Persimmon 21p lower at £12.57 and Barratt Developments down 6.4p at 368.1p. Alastair Stewart at Westhouse Securities said:
Two speeches by George Osborne symbolise our view that investors should switch out of housebuilders into contractors. The Chancellor's speech at the Mansion House on 12 June, threatening tighter mortgage lending, triggered sharp falls in housebuilders' shares. He then proposed 'High Speed 3', creating a northern 'Super-city'. The government appears to be moving infrastructure up the political agenda. The rally in housebuilders' shares post-FPC is an opportunity to switch to contractors.
Sports Direct International, ahead of its latest attempt to win shareholders over to its incentive scheme for employees including Mike Ashley, has slipped 18p to 705.5p. The company has squashed trade talk it was considering an offer for footwear retailer Office. It said:
Such speculation is unhelpful to the customers, staff, suppliers and other stakeholders of both companies, particularly as Sports Direct focuses on building brand support for the group's Premium Lifestyle format - USC / Republic. The board believes that maintaining strong brand relationships is a strategic priority for Sports Direct, particularly given the difficulties that the competition authorities appear to have in addressing the supply issues faced by the group.
Analyst Freddie George at Cantor Fitzgerald said:
In a bizarre statement, the company has confirmed that it is not considering acquiring Office, the shoewear retailer, which is currently owned by Silverfleet Capital. In the statement, management comments that 'maintaining strong brand relationships is a strategic priority', which we believe refers to the company's relationships with the sportswear suppliers, Adidas and Nike. An acquisition of Office would have given Sports Direct better access to the top selling casual footwear brands, All Star, Van and Toms.
Final results are due July 17th. Our 2014 pre-tax profit forecast is £252m. We are retaining our hold recommendation on Sports Direct and target price of 800p. In view that Sports Direct appears to be connected with any rumoured sportwear disposal and the company's revised bonus scheme is again likely to be rejected by shareholders on July 2, the stock is fully valued, in our view, at 24.4 times our 2014 forecasts.
