MARKET REPORT: Bidders target Elementis deal

| October 27, 2012 | 0 Comments

Geoff Foster

16:17 EST, 26 October 2012


09:55 EST, 27 October 2012

Professional punters say its elementary. Elementis’ days of independence are numbered.

Shares of the speciality chemicals fell 12.1p or 5.58 per cent to 204.9p on news that sales at its unit that caters for the oilfield industry slumped 23 per cent in the third-quarter, prompting the board to warn that full-year operating profits would be adversely affected.

Elementis blamed the poor performance on a slowdown in shale gas drilling activity in North America, a late start to the Canadian drilling season and inventory adjustments by major oil services customers.

MARKET REPORT: Bidders target Elementis deal

Speciality chemical companies have
dropped like flies in recent years and rumours are now rife that
cash-rich private equity players are hovering above Elementis which has
strong cash generation and income attractions.

With July’s interim results the company said it had begun a special dividend programme to pay out as much as 50 per cent of year-end net cash to shareholders.

Any bidder would have to get Schroders on side as it is the major shareholder with 10 per cent of the equity.

News that US economic growth picked up in the third quarter, growing at an annualised rate of 2 per cent – overshooting expectations of a 1.8 per cent increase – helped Wall Street open with a gain of 26 points but did little for sentiment in London.

The Footsie traded narrowly and closed 1.66 points up at 5,806.71.
Top Footsie performer was mining giant Anglo American which moved against the trend with a leap of 76p or 4 per cent to
1933.5p on news of chief executive Cynthia Carroll’s decision to step
down. Some institutional investors have been wanting her to walk the
plank for months.

African Barrick Gold, Tanzania’s
largest gold producer, on the other hand, shed 16.5p to 465p.
Third-quarter revenues fell by 25 per cent to £165million, due to a 19pc decline in production to 147,786 ounces, and a 5 per cent decline in the average realised gold price to $1,688 per ounce. Net income fell 72 per cent, to £18million.

Other miners gave ground as metal
prices dipped on worries about global demand. Kazakhmys shed 21.5p to
714.5p and Lonmin 11.4p to 487.15p. Fresnillo declined 18p to 1912p  on
further consideration of Manuel Luevanos’s decision to quit as chief
operating officer. He has been in office since the group’s flotation in
2008. It comes as the group plans to splash out £310m on a new mine in

Persistent demand amid reports of a pending upbeat broker’s circular lifted Weir Group 29p  to 1717p.

BG Group advanced 17p  to 1324p on
buying ahead of Thursday’s third-quarter results. Broker Charles Stanley
points out that over the last year, the share price has underperformed
the market by about 9 per cent.
The nine month figures will confirm that BG is on track with expansion
plans. It expects third-quarter profits of £1.24bn, up from £1.18billion
in 2011.

Credit card insurer CPP soared 2.96p or 34 per cent to
11.75p on hopes for progress in the investigation by the Financial
Services Authority into the way in which it sold protection against
identity theft. The company said that while it was still uncertain about
the duration and the outcome of the probe, which was launched in March
last year, it had agreed with the FSA a framework for the operation of
its regulated UK entities. Its performance in 2013 will be hit by the
ongoing probe, it admitted.

Broker Peel Hunt remains a seller of CPP and slashed its 2013 pre-tax profit forecast by 40 per cent to £17million from £28million.

Renewed nervous selling dragged Daily Mirror publisher Trinity Mirror a further 9.75p  or 16 per cent lower
at 51.25p. On Monday the lawyer who handled many of the previous
phone-hacking cases filed legal claims against Trinity Mirror on behalf
of four people, including the former England football manager Sven-Goran

Xchanging eased a penny to 113p
despite overnight news that its subsidiary XIS has been awarded a
£65.5million five year contract to continue providing the Insurers’
Market Repository to the London Insurance market. Espirito Santo says
the contract is an important win, reducing an element of forecast
uncertainty and demonstrating the regard by which the group is held by
Lloyd’s of London.

Support services group Berendsen
cheapened 10p to 565p after reporting that third-quarter trading has
been in line with expectations and the board continues to expect good
progress for the full year. Broker Oriel Securities has a target price
of 650p and says the group is well positioned in Northern Europe,
supplying to largely resilient end markets.

- Talk of imminent corporate activity helped Cable Wireless Communications edge up 0.03p to 37.61p. Broker Espirito Santo believes CWC’s assets are significantly undervalued compared with the value implied by the current share price, with the potential to realise further value through more disposals and merger and acquisition activity. The market still awaits the potential sale of its Monaco Islands division to Batelco and Macau to CITIC Telecom International.

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