Market Report

BHP walks away and Sidara offer ‘looks doomed’

Wood Group may survive a series of offers

A revival in deal activity has given a lift to London’s stock market, though the main focus of attention was on a takeover move that look like collapsing and one that has already failed.

Wood Group‘s board did not immediately reject a fourth and final proposed offer from its suitor Sidara, worth 230p a share, instead saying it was “evaluating” it and would respond later.

However, Dan Coatsworth, investment anlayst at AJ Bell, said “market reaction to the final one doesn’t bode well – the shares slipped to 185p which implies this deal is also dead in the water.

“Wood Group hasn’t engaged in any discussions with Sidara since the first approach and that suggests it has no interest in being gobbled up.”

BHP announced just before the London market closed that it was withdrawing its interest in acquiring commodities rival Anglo American which had indicated a dislike for the structure of the offer.

“From the start, the structure of the takeover looked too complicated and ultimately investors prefer hard cold cash, not an all-share bid,” said Coatsworth.

“The prospect of a corporate marriage was looking slimmer by the hour and BHP finally confirmed just before the UK market close that it had given up and walked away. This isn’t a surprise as the deal looked doomed from the start.

“In effect, BHP has done all the hard work in sounding out whether Anglo American was willing to be bought and in what way it might accept a bid. BHP has fired the starting gun for others to throw their hat into the ring and it seems almost certain that another player could bid for Anglo American in the near future.

“Buying Anglo American would provide a ready-made spread of copper assets which are of increasing importance to the global energy transition from fossil fuels to renewables.

“Copper is used in wind farms, electric vehicles and so many other ‘new era’ energy devices. Miners are hungry for more and it is much easier to buy another company that is already sitting on proven resources than spend years on exploration.

“All eyes are now on Glencore and Rio Tinto to see if they fancy their chances at buying Anglo American.”

ConocoPhillips buying Marathon Oil is the latest in a long line of deals in the natural resources space as companies open their wallets to boost scale.

“On paper, the takeover has plenty to excite ConocoPhillips’ shareholders – immediately earnings enhancing, lots of cost synergies and more low-cost supply of oil,” said Coatsworth. “However, the negative market reaction is telling, particularly as ConocoPhillips isn’t paying a chunky premium to buy Marathon.

“There is some chatter that Marathon’s assets aren’t high quality which might be a turn-off for ConocoPhillips’ shareholders.”

A top-ten shareholder in the parent company of Royal Mail is objecting to the £3.6 billion takeover by Czech tycoon Daniel Kretinsky.

Columbia Threadneedle Investments, which holds about 5% of International Distributions Services, believes that the offer of 370p a share undervalues the postal services group.

The IDS board has recommended the offer from EP Group, a conglomerate controlled by Mr Kretinsky and the largest shareholder with 27.6%.

The FTSE 100 ended lower for a sixth consecutive session, falling 71.11 points, or 0.9%, to 8,183.07 as traders fretted about inflation and the timing of interest rate cuts. 

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