Markets move higher on hopes Federal Reserve will continue bond buying programme
Amec is hoping to build up its emerging markets business with the proposed £1.9bn purchase of Swiss-based Foster Wheeler.
The UK engineer has added 17p to £10.96 after it announced the deal, which Amec said would more than double its revenues in fast growing regions. The cash and share deal would mean Foster Wheeler investors holding 23% of the enlarged company.
The £968m cash component of the offer will be met from Amec's existing resources. The company, which supplies services and equipment to the oil, gas and mining industries, has been on the lookout for acquisitions for some while. Amec chief executive Samir Brikho said:
As well as positioning us across the whole oil and gas value chain and providing scale in our growth regions, we would expect double digit earnings enhancement in the first twelve months.
But the company added that the full benefits would not be realised in 2014 and it did not expect to report adjusted earnings per share of more than 100p in the year.
It also announced that while 2013 trading was in line with expectations, the recent strengthening of the pound against the dollar meant it would take a £10m hit on earnings.
Liberum Capital said the trading update was disappointing, and was also less than enthusiastic on the deal:
Initial reaction is that the greater emphasis on lower growth mid- and downstream oil and gas markets and the power equipment business is unhelpful. This negative impact should be at least partially offset by the synergies.
Overall, markets have shrugged off the worse than expected US jobless figures from Friday, mainly on the assumption that the US Federal Reserve may now be reluctant to trim its $75bn monthly bond buying programme in the immediate future.
The FTSE 100 has edged up 6.58 points to 6746.52, with Morrisons leading the way. The supermarket group has added 7.5p to 243.6p following reports an activist US investor, Elliott Associates, was pushing for it to sell off some off its property assets. But Clive Black at Shore Capital said:
Whilst there can be short-term gains for shareholders from a comprehensive property sale programme through distributions, we question whether such activity is in the interest of the company in the long-run; will the shareholders that may seek short-term radical action be there for the duration? Morrisons is a low margin business and the desirability of intensifying operational leverage from a major property programme is highly questionable in our view.
Meanwhile Morrisons' online partner, Ocado, continues its recent gains, up another 32.5p to 548p. But HSBC repeated its underweight rating on Ocado, albeit raising its price target from 200p to 235p.
Still with retail, Debenhams has added 3.7p to 85.25p on news Sports Direct International, down 8.5p at 747.5p, had bought a 4.63% stake in the department store group.
Banks are benefiting from news the Basel Committee proposes to loosen its definitions of leverage ratio. Liberum said:
In theory relaxed capital should not impact valuation but in practice these definitional revisions reduce pressure on Barclays to rapidly shrink its investment bank balance sheet which is helpful for valuation.
Barclays is up 8.4p at 292p while Royal Bank of Scotland has risen 7.3p to 364.2p and Lloyds Banking Group is 0.82p better at 83.86p.
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