Markets live chat transcript for the chat ending at 12:25 on 26 Mar 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Right!
PM: Good morning and welcome to Markets Live – FT Alphaville’s daily markets commentary.
PM: Neil Hume is with me.
PM: Fired up
PM: lots to get through this morning
PM: And we are going to start with ……
PM: Xstrata
NH: or shall we start with a heart warming story about the UK’s oldest stockbroker
NH: or even Debs
PM: Ah, yes
PM: For VP, anything
NH: the seller of Debs is Merrill Lynch Private Equity
PM: Not Bauger
NH: more on that later
PM: First we have an important piece of news to share with readers this morning.
NH: Historical moment.
PM: A turning point.
NH: London’s oldest stockbroker is close to being taken over by an Indian financial firm.
PM: Yep, we should quickly say that this is scoop by the Economist Times of India…
PM: We are happy to give credit where it is due. Unlike certain other members of the British press.
NH: We acknowledge the fact that the business of landing business scoops has been steadily migrating to places like India.
PM: Yes, well the news is that Religare, a retail brokerage based in New Delhi and listed in Mumbai, is looking at a takeover of Hichens, Harrison, which is London’s oldest independent stockbroker.
PM: And that’s not in an old, decrepit, end of the road sort of way.
NH: Not at all! Busy little house, Hichens.
NH: Apparently there are two brothers called Singh behind Religare. Billionaires, apparently.
PM: And not just in rupees
NH: Malvinder and Shivinder Singh, control Ranbaxy Laboratories
NH: A statement from Hichens this morning said they were discussing a possible offer at 285p a share.
PM: I guess they will be resisting this offer – sparkling futures as an independent entity,…come thru the Crunch in fine fettle, etc ???
NH: Er, not so sure. I think cash is cash.
NH: And it may be that all this was in the price – the shares are down 8.5p at 268p, currently
PM: There’s a rubbish gag in here about Hichens being a curry trade specialist , but it’s beyond me for the moment.
PM: anyway….
PM: 
PM: VP might be right below. We are going to have to check our facts on that
NH: right, we are moving on to some bigger M&A news
PM: Thanks Basil
PM: Let’s go to Xstrata for MP
PM: shares holding up fairly well, in our view
NH: yep
NH: down 287p at £34.40
NH: a drop of 7.7%
PM: just to recap
PM: after the US market closed last night, we got news that Vale of Brazil had terminated takeover discussions with Xstrata
PM: here are the respective statements
PM: Xstrata plc (”Xstrata”) announces that discussions with Vale regarding a
potential combination of the two companies have been terminated by mutual
agreement.
Mick Davis, Xstrata Chief Executive commented: “While Vale and Xstrata continue
to believe that a combination of the two companies could realise significant
value for both sets of shareholders, we have not been able to reach agreement.
We have therefore mutually decided to cease discussions.”
This announcement has been issued with the consent of Vale and a similar
announcement will be made by Vale to the Brazilian and New York Stock Exchanges
today.
PM: Statement regarding Xstrata plc (”Xstrata”) - Vale discontinues negotiations for
the acquisition of Xstrata
Companhia Vale do Rio Doce (Vale) informs that it put forward an indicative
proposal to Xstrata that included a cash and shares offer for 100% of Xstrata
which it believes would have created significant value for both sets of
shareholders.
Given that an agreement was not reached, discussions between the parties have
been discontinued.
NH: For the purposes of Rule 2.8 of the City Code on Takeovers and Merger (the City
Code), Vale reserves the right to announce an offer or possible offer or make or
participate in an offer or possible offer for Xstrata and/or take any other
action which would otherwise be restricted under Rule 2.8 of the City Code
within the next six months in the event that: (i) an agreement or recommendation
from the Board of Xstrata is forthcoming; or (ii) there is an announcement by a
third party of a possible offer or a firm intention to make an offer for Xstrata
or Xstrata announces that it has received an approach in relation to a possible
offer from a third party; or (iii) Xstrata announces a “whitewash” proposal for
the purposes of Rule 9 of the City Code or a reverse takeover; or (iv) there is
a material change in circumstances.
NH: As you can see from those statements
NH: looks as if the two sides ended the talks on friendly terms
NH: Now, that seems to have led some investors to take the view that this deal will be resurrected some time in the future
NH: or that Xstrata will go off and find another deal
PM: Mick Davies — knows a thing or two about deals. Some might even call him a junky
NH: stock is also being supported by some short covering
NH: around 4.6% of Xstrata was on loan as of March 21
NH: on top of that most of analysts have come out this morning and said that fair value for Xstrata shares is around £33/£34 a share
NH: in fact one analyst tells me that at £34 Xstrata trades on around 5 times EBITDA
NH: what hasalso been quite interesting this morning has been in the reaction of other mining stocks
NH: there seems to be a view, rightly on wrong, that Xstrata could hit the acquisition trial again
NH: so we have Lonmin up 66p at £30.91
NH: and Anglo American 103p better at £29.45
PM: Ok, thanks for that
PM: and why did the talks end?
NH: partly over price
NH: and partly because of Xstrata’s biggest shareholder, Glencore
NH: who were demanding extended metal marketing rights, that Vale were simply not prepared to give
NH: here’s are some comments made by Vale’s chief executive
NH: made last night
NH: Vale CEO Roger Agnelli told reporters in Sao Paulo today that the
company can resume negotiations to buy XTA. “We can resume negotiations at any moment.
Doors are not closed, but it was not good for both companies to keep
negotiating for a long time.'’ He added, “The biggest difficulty for
negotiations was that Glencore wanted an accord for trading of
commodities. We didn’t need to buy Xstrata, and Glencore didn’t need to
sell it. Vale was absolutely prepared to go ahead with the purchase.'’
PM: Ok
PM: You must have some good analyst comment on this one
NH: Yep, there is plenty around
NH: and most of it positive
NH: Mick Davies, the CEO of Xstrata, has a big fan club
NH: right, this is from Michael Rawlinson at Liberum
NH: We feel that both marketing rights and valuation were the two issues that prevented a deal. With no other active talks going on, we expect Xstrata to fall to new support levels of c.£34/share (equivalent to c.5x maked to market EBITDA). Short term we would expect the company to address the share recycling associateed with the failed bid through an aggressive buy back;
We would recommend buying the shares on weakness today. The group has unrivalled organic growth, a creative and entrepenurial management team and remains one of the few teams willing to ‘deal’ in a consolidating landscape;
NH: On a more medium term, we would observe that the ongoing services of Mick Davis is likely to be secured through a new pay package to approved at the AGM on 4th May. Thereafter, any number of transformational deals could be a possibility. These could include a merger with Glencore, Anglo American, a Chinese company or even a deal relating to the defence of Rio Tinto.
For now then the London mining market remains an interesting place to be. On a trading view we would expect Anglo American and possibly Rio Tinto to bounce in reaction to today’s news. We also note that now the company is no longer in the offer period and can recommence its share buyback.
NH: The failure to pull off the Vale Xstrata deal has two main conclusions for us:
1) Xstrata/Glencore does not see a reason to sell out on the ‘cheap’, in other words the stronger for longer theme still seems pretty much intact. As you know we saw value in the stock of around £34 even before synergies and the higher commodity prices (in particular coal).
2) Including synergies we would have put the value of Xstrata on a very conservative basis on £43, even before the higher commodity prices. Selling out at £45 would have been a bad sign for us in the context of the stronger for longer theme; and
(3) A number of different industry consolidation scenarios could now be thought of. Clearly, Xstrata itself will want to continue its strategy of ’small to medium-sized acquisitions’ (such as Lonmin), while developing its project pipeline.
NH: That said, bigger deals are not off the agenda and we would point to AngloAmerican in this context, either in terms of a reverse take-over, where the Xstrata inserts itself
into the Group or where it goes together with let’s say Vale and bid for the whole of AngloAmerican and then break it up. Alternatively, the Chinese could make a move on AngloAmerican given its exposure to iron ore, copper, nickel, coal and platinum. BUY AngloAmerican with a TP of 4,500p.
NH: this is from Merrill
NH: Vicky Binns
NH: Xstrata and Vale have announced that they have terminated their merger discussions by mutual agreement. Vale has confirmed that it did make a cash and share proposal to Xstrata; however, it was not accepted. Vale has reserved the right to bid for Xstrata again, if certain conditions apply (i.e. Xstrata’s board accept the offer or if there is a new offer for Xstrata from a third party).
A key question is what level Xstrata shares could trade to. A few weeks ago we would have used GBp2800 as a starting point based on applying a 10x PER to our earnings forecasts then. Since then, however, there has been a material change in our outlook for both coal and copper prices. After major upgrades to our earnings estimates, we today have Xstrata trading on a 2008E PER of 8.6x and a 2009E PER of 7.4x. In other words, quite compelling valuation even without the bid. Our price target of GBp4650 is based on 10x our 09E EPS.
NH: This is not to say that shares won’t trade lower on the back of the termination of talks but just that the downside should be limited as “value” buyers put a floor under shares. We advise buying aggressively at below GBp3300, which represents about 7x PER. Our base case earnings forecasts are $8.02 for 2008E and $9.24 for 2009E.
NH: this is from Cazenove
NH: Xstrata has announced takeover talks with Vale have ceased with the sides failing to reach agreement on price. We believe the XTA share price reaction is likely to be negative today given we estimate ~10-15% of the register is currently held by merger arbitrage funds; however, this is likely to lead to an even more compelling entry point for longer term investors.
Indeed we believe the share price has been depressed by the deal, primarily driven by the considerable upward earnings momentum generated by Xstrata’s key commodities (coking, thermal, copper) - this is likely to have been the primary reason for the talks breaking down in our view with Vale unlikely to have been able to meet Xstrata’s valuation of itself.
For Xstrata standalone, Plan B is very much intact - the company has completed seven acquisitions in the last year, of which five in coal were justified on the basis of $75/t thermal. At a likely contract settlement of $130+, payback is 3 yrs or less. Divisional management has identified several bolt-on deals which are likely to move forward shortly. Meanwhile the best organic growth profile amongst the large cap diversifieds is in the process of being delivered.
NH: Valuation remains extremely attractive, the cheapest stock in sector apart from FQM, trading at 6.0x and 5.4x 2008-9E marked to market PER, and 4x and 3.3x EV/EBITDA. While we believe the stock will trade down today we see extremely strong valuation support once the merger arbs exit. We estimate the company has generated FCF of $1.7bn since 1 December; with the company 32% geared as of 31 Dec, we estimate this will now be sub-30%. Should YTD average prices persist for 2008, gearing would fall to 18% by year end. Attention will refocus on Xstrata’s next move with a tie-up with AAL no doubt coming into focus again, in our view. Indeed we would also not discount the potential for a deal with Vale to occur eventually - both sides clearly still see potential in the combination.
NH: and this is Goldman
NH: While we believe the collapse of the negotiations with Vale are likely to
hinder Xstrata’s near-term share price performance, we believe the
company remains well placed in the industry to benefit from positive longterm
commodities fundamentals. Moreover, in terms of size and asset
base, it remains one of the names that is attractively positioned to
participate in industry consolidation as we discussed in our report of
February 26, 2006, Miners look to M&A for an edge to gain from a strong
metal cycle.
Reverting back to our EV/DACF-based valuation of Xstrata shares (as used
prior to the emergence of discussions with Vale) lowers our 12-month
price target to 3,300p from 4,660p. We downgrade the shares to Neutral as
we currently see more potential upside to other names in our coverage
universe.
At our price target of 3,300p, Xstrata is valued at 8.75x 2008E EV/DACF,
6.45x 2008E EV/EBITDA and 10.7x 2008E PE.
Risks to our price target include higher or lower than forecast metal prices.
47.3 mln shs at 60-66p, probably either ML or CVC shares. DEBs reports on
the 15th April… does not boode well for the figures.
PM: Plenty of reading material there!
NH: and its all buy, buy, buy
PM: Should give readers this reminder…
PM: Bickie
Reminder to readers - if you arrived late and want to stop the dialogue ‘jumping’ as you catch up, hit the ‘pause auto-scrolling’ tab at the bottom right hand corner
PM: But to summarise — its Buy Buy Buy
NH: yep
NH: although not everybody is taking that view
NH: Some traders I have talked to say
NH: today is all about short covering
NH: and that once we get another serious down day in the market – and we will get one – people won’t be so keen to hold the stock and wait for another bid from Vale
PM: That is a good point
PM: people won’t want to hold for a deal sometime in the indefinite future about a possible deal that may or may not happen at an unknown price, with regulatory uncertainty……
PM:
PM: Right, we should move on to the wider market and some RAW market info
NH: before we do
NH: we should take a look at Kazakhmys
NH: intriguing statement came out from the Kazakh govt yesterday
NH: after the market closed I should add
NH: a lot of people might have missed it
NH: so here it is
NH: Kazakhmys PLC (the “Company” or “Kazakhmys”) welcomes the recent publication of a statement by the Government of Kazakhstan (the “Government”) that it wishes to acquire a minority interest of up to 15% in Kazakhmys. The Company confirms that it has been in preliminary discussions with the Government on a variety of options including the potential for the Company to acquire natural resource
assets in Kazakhstan in exchange for the Government acquiring a minority stake
in Kazakhmys. Should these discussions lead to an agreement being reached then
a further announcement will be made and, as appropriate, Kazakhmys shareholder
approval will be sought.
PM: Hmmmm
NH: now this comes just weeks after ENRC, another Kazakh miner, confirmed that it was considering a tie-up/bid for Kaz
PM: so what does it all mean?
PM: Is this the Kazakh govt getting tough?
PM: and demanding a stake in the company
PM: they also have a 15% holding in ENRC
PM: Correct?
NH: I think so
NH: and the market does not seem to be worried by the prospect of the Kaz govt taking a stake
Kazakhmys (KAZ:LSE): Last: 1,600, up 58 (+3.76%), High: 1,639, Low: 1,578, Volume: 1.09m
NH: biggest riser in the FTSE 100 at the moment
NH: the view seems to be that this could be good for Kaz
NH: the company has been looking to diversify and move away from copper
NH: in fact it has been doing so
NH: and a deal with the Kazakh govt could accelerate that process
NH: the Kazakh govt has a significant amount of coal assets
NH: that could be injected into the company in return for a stake
PM: Ok — ta for that
PM: but that probably means a deal with ENRC won’t happen
NH: well, I don’t think there were a lot of people banking on that happening anyway
PM: Sure — taht was our position, certainly
PM: Any analysts’ comment?
NH: yep, got some more stuff from Michael Rawlinson at Liberum
NH: The market may respond fearfully to the announcement, at worst viewing it as an aggressive stance by the government to partly re-nationalize assets. However, we see it differently:
It is clear the government is neither appropriating equity nor intending to buy shares of Kazakhmys through the open market. Instead Kazakhmys would issue new shares to govt in return for assets. We view this as a positive development for the company in what could be an interesting acquisition opportunity. Although the vast majority of Kazakhstan’s mineral deposits have already been privatised we note the government still holds significant coal assets and suggest these would fit well with the company’s increasingly important power business;
NH: Given the timing of this announcement, it is possible the market will read this as a response by the company to the ENRC release on March 12th confirming what they saw as early stage talks; while we do not dismiss the possibility the two are related, we would point out that the government statement was made on Friday and related to a decree made earlier this month (March 3rd) under the normal process and prior to ENRC;
The potential stake build by the government could put Kaz on a more equal footing to that of ENRC (where govt already holds 15%), whilst also bulking up Kaz’s size on an absolute and relative basis. In our view, the political positioning of Kazakhmys relative to ENRC in any possible industry consolidation remains unclear; we would highlight that perhaps contrary to UK market sentiment, recent research from Kazakh based brokers suggests Kazakhmys may have the strongest support of the government.
We have attached an updated version of our quick valuation model, which shows the implied value of copper business trading on current year EV/EBITDA of 3.8 and 3.2 on a marked to market basis. With the ENRC, power and gold parts of this SOTP also looking cheap, the stock is very good value.
PM: Thanks for that
PM:
PM: We must do the wider market!
PM: How’s the footsie fairing?
NH: resillient
NH: hardly lost any of yesterday’s gain
NH: currently down 25.6 points at 5,663.5
NH: being propped up by the miners - with the obvious exception of Xstrata
PM: And what about the banks — how could we get so far into an ML session with out mentioning them?????
NH: sector is small down today
NH: a wee bit of profit taking
HBOS (HBOS:LSE): Last: 541.00, down 3.5 (-0.64%), High: 549.00, Low: 536.00, Volume: 30.19m
Royal Bank of Scotland Group (RBS:LSE): Last: 345.75, down 5.5 (-1.57%), High: 352.75, Low: 344.25, Volume: 15.38m
Barclays (BARC:LSE): Last: 453.25, down 5.75 (-1.25%), High: 462.50, Low: 451.00, Volume: 13.29m
Standard Chartered (STAN:LSE): Last: 1,774, down 16 (-0.89%), High: 1,791, Low: 1,755, Volume: 1.66m
PM: We should mention here that we are picking up rumours that certain Wall Street firms are now using these new Fed facilities to v v profitable effect.
PM: Hoovering up MBS at distressed prices — using money from the Fed — and then selling it all on at distressed plus 1 or whatever
PM: Sounds abusive — but as Sam was pointing out earlier — this is just what Ben Bernanke needs to happen
NH: that said, did you see what Meredith Whitney came out with earlier
NH: that’s the banking analyst at Openhemier
PM: I did — here’s some extracts
PM: (Sorry Google — meant mortgaged backed securities)
PM: Summary: We head back to the chopping block, reducing our 1Q08
estimates for U.S. banks on average by 84% (led by C at -309%), and our
FY2008 estimates on average by 30% (led by C at -120%),to reflect 1Q08
mortgage and CDO related write-downs. Since November, we have cut
estimates for financials over 30 times, with no clear end in sight.
PM: We cut our 1Q08 estimates by an average of 84% (led by C at -309%), and
our FY2008 estimates by an average of 30% (led by C at -120%). We are
now on average 47% below consensus for 1Q08 and on average 34%
below consensus for FY2008. For FY2009 we are on average 14% below
consensus. We expect consensus to trend lower as we approach earnings
in mid-April.
• During 1Q08 a number of important mark-to-market indices declined and
our new estimates reflect these losses. In 1Q, the ABX indices dropped
over 30%, LCDX index price dropped 5%, and CMBX spreads widened.
We estimate write-downs for our universe for CDOs, Alt-A, CMBS, and
levered loans.
• Despite cutting estimates for financials by over 30 times since November,
we are confident this will not be our last reduction in 2008. Rather as key
mark-to-market indices trend lower, the housing market worsens, and the
U.S. consumer comes under increasing pressure, we anticipate further
downside to both estimates and stock prices.
PM: Should add that Helen did a post earlier on this, pointing out that Ms Whitney is also saying “Sell humans”
PM: Was v funny 
NH: 
PM:
PM: Let’s see whether we can wake people up with Sainsburys
NH: something everyone should have a view on
NH: good performance from the stock this morning
NH: currently up 11.5p at 348p
PM: Interesting…
NH: follow a strong trading update
NH: that has beaten expectations
NH: and eased some of the concerns about the increasingly competitive nature of the UK food
retailing market
NH: with all of the big four firing on all cylinders and Waitrose and M&S also going well
NH: there had been a view in the market that Sainsbury would suffer
NH: on top of there have been concerns about stock overhangs
NH: Tchenguiz and the QIA
NH: collectively they own over 30%
PM: Not that we are suggesting they are acting in concert!
NH: anyway stock has underperformed the market and its peers
NH: so Justin King and the team at SBRY needed to deliver a decent statement this morning
PM: Hmm - -i can see that
NH: and they have
NH: here are the highlights
NH: Most analysts expected SBRY to deliver at least 3.7% LFL sales growth ex-petrol in Q4
NH: some were going for as much as 4%
NH: Sainsbury beat that and came in at 4.1%
NH: and all these figures are on a Easter adjusted basis
PM: any comment on margins in the update??
NH: no, which is slightly annoying
NH: but most analysts think the company is on target for FY profits just under £500m
NH: so things must be OK on the margin front
NH: on top of that
NH: company has also announced a property JV with British Land this morning
NH: this is to unlock the value of 39 stores
NH: according to the blurb
NH: Now, the news on rental yields is not great
NH: 5.1%
NH: A year ago supermarkets were fetching sub 5% yields
NH: but it still well ahead of the level at which the stock market seems to be valuing Sainbury’s property portfolio
NH: actually got some good comments on this from Nick Bubb at Pali International
NH: The other good news today is that SBRY has announced a £1.2bn jv with British Land to unlock the development value of 39 of its stores and that the rental yield basis is as good as 5.1%. This is some distance from the sub-4.5% yields of a year ago, but it is not as low as the 5.4% yield valuation that we have used and would imply a total portfolio value of £7.6bn if the deal is representative of the whole portfolio. Property backing has lost its appeal in the stockmarket, but we still think that it is illogical for JS’s EV to be trading below even a conservative value of its freehold property (we estimate £7.2bn), when Morrison’s and Tesco (395p: Neutral) trade above their freehold value..
NH: Regardless of what happens to the Tchenguiz/ Qatari situation, the risk/reward balance looks attractive at this level and we maintain a Buy. Our 440p target would put SBRY on a similar freehold adjusted rating as MRW and TSCO and that may be a bit too much to hope for in this market, but the shares look very oversold relative to Morrisons in particular.
NH: and here is a quick bit of comment from Cazenove
NH: Sainsbury has released its Q4 trading statement, covering the period to 22 March. Key points:
Total sales up 6.7% (5.1% ex fuel)
Ex fuel LFL +4.1% - this is ahead of consensus (c.3.8%) and a reacceleration from the Christmas quarter (3.7%). This is a robust performance in the light of a comparative that toughened by 90bps in the quarter. Looking forward comps remain tough in Q1 (+5.1%) but soften thereafter.
These numbers have been adjusted for the early Easter effect.
In line with the new company policy there is no mention made of inflation although clearly this has provided a tailwind. More detail may become available in the conference call (8:45am).
NH: On a first read we do not anticipate making changes to our forecasts.
Separately Sainsbury has announced the creation of a property JV with British Land for the development of 39 stores currently leased by Sainsbury. The pertinent point in this is that the net equivalent yield on this deal is disclosed as 5.1% which, as discussed below, is substantially below the levels implied by the current Sainsbury share price.
Conclusion and valuation: This is a solid performance by Sainsbury and defies the hints that the company had fallen materially behind the pack in the UK industry. The valuation remains relatively uncompelling on a PE basis; to Mar-10E the shares are on 12.4x, in line with Tesco (12.4x to Feb-10E) whose long term prospects are, in our view, superior by virtue of its exposure to the globalisation of the food retail industry.
On an EV/EBITDA basis there is a greater attraction (6.2x Mar-09E, 5.4x Mar-10E) whilst on EV/Sales the shares are as cheap now as at any point since the bottom of the market in early 2003 (chart attached below). With the shares off c.45% from the mooted bid price of less than 6 months ago it is clear that the market is utterly unwilling to countenance the asset-based argument for the shares whilst the unwinding of the merger arbitrage holdings (and perceived related share overhang) has simultaneously created powerful downwards technical pressure.
NH: On fundamentals we believe the valuation is becoming extreme; on a sum of the parts basis the current share price is implying a retail PE of 7.0x Mar-09E (broadly in line with UK general retail) and a property value per sq ft of just £425. This implied property valuation is materially below the level at which even recent deals have been done (£650-700psf) let alone replacement cost (c.£600psf) and implies a rent yield of over 8% - a level to which UK retail yields did not rise even in the early 1990s recession. In the immediate term we see little to change the prevailing attitude of the market to asset-based propositions (although the JV announcement should help) hence this remains a situation, for now, for the long term and/or contrarian investor
PM: Thanks for all that
PM: and staying with the retail sector…
NH: before we do, i would like to echo the comments below
PM: you and everyone else!!!!!
NH: I am with Lemmy on this
PM: Im going with Maximus - the system needs fixing
PM: remember with work for the financial times — we need a financial sector
NH: we do, but the banks in the UK do have to meet the BOE half way
NH: they can’t keep reporting record profits, increasing divis, buying back shares
NH: and then expect the bank to lend against their dodgy mortgage assets
PM: yeah yeah yeah
NH: thanks Super SWF for the url
NH: not the sort of thing you would expect to see in a family newspaper
PM:
NH: right, excellent
NH: everyone has finally woken from their slumber
NH: a bit of central bank debate never fails to do the trick
PM:
NH: but going back to stock specific news
PM: Debenhams?
NH: stock getting hammered this morning
NH: down 11.5p at 60.25p
NH: drop of 16%
PM: whoa
PM: What. is. going. on.
NH: well
NH: one of Deb’s pre-float backers – the private equity arm of Merrill Lynch we think – has decided to slot a few shares this morning
NH: placed 47m shares – that’s around 5.4% of the company - through
NH: Merrill Lynch
PM: Oh — what other bank would they use???
PM: Merrill brought the market this thing in the first place
NH: Now this is interesting on a number of levels
NH: first the seller has taken advantage of the recent spike in the Sainsbury share price
NH: it was up sharply on Thursday as short sellers were forced to close positions to cover margin calls or losses elsewhere
NH: Merrill was trying to place the stock in a range of 60-66p this morning
NH: in the end it had to settle for 60p
NH: and the disposal comes just three weeks before the company is due to announce half year results
PM: That is not good. not good at all
PM: also with the shares so low
PM: why sell???
NH: represents a substantial discount to the Debenhams float price of 195p at the beginning of 2006.
PM: Why not jsut hold on
PM: I mean things cannot get much worse can they?
NH: well they could go to zero
PM: 
NH: But that’s unlikely
NH: In fact the company recently hosted a store visit for analysts
NH: that seemed to go down very well
NH: so the decision to sell seems all the more mysterious
NH: although I wonder if it somehow tax related coming before the end of the fiscal year
NH: although that can’t be right because they would not appear to have made any money on this
NH: whatever for the sale, the market is worried and quite a few are following the lead of merrill and deserting the ship
PM:
PM: Harry asking about Libor — Oh My has answered
PM: 3m ticked up to 6% on the button
PM: up from 5.99500 previously
NH: it’s a 6% again
NH: banks still hoarding capital
NH: as per our front page story this morning
PM: Dollar libor also going up
PM: but only to 2.99%
NH: will give the banks some extra ammo in their pleading with the BOE
PM: And euro has jumped as well 4.70 to 4.72
PM:
PM: Ok Neil — give us some RAW
NH: well, I was going to Enodis
NH: but HA had beaten me to it
NH: yes, there are rumours doing the rounds this morning
NH: RAW of course, but from seriously shrewd punters
PM: red raw but tasty
PM: 
NH: stock currently trading 7.5p at 151.25p
NH: a gain of 5%
NH: one of the best in the FTSE 250
PM: SO what’s the story!?!?
NH: that the company is talking to Manitowoc again
PM: Thsat’s the US crane and fridge maker
NH: yep
PM: Tried to buy Enodis a whle back
NH: they were in talks over a 220p bid
NH: discussions ended back in August 06
NH: but MTW have remained interested according to our sources
NH: and the deal still makes a fair bit of sense
NH: although there are some competition issues in Europe
NH: but they are manageable
PM: Obviously the pull back in the share price makes a deal more doable this time
NH: it does
NH: and as we have discussed before a bid for Enodis makes plenty of sense
NH: to recap
NH: back in November
NH: MTW filed Q3 figures
NH: and said
NH: it was ….exploring opportunities to grow our Foodservice segment through acquisitions and internal initiatives
PM: 
NH: Now, MTW are big in icemakers and fridges – the cold side of the industrial catering equipment market
NH: and Enodis has a big US operation that is fixed on the hot side of the industry
NH: So the two are a good match
NH: and I must stress this point again we do not think there would be any competition problems
NH: MTW might have to sell some of Enodis’ cold side business but as they want to expand in the hot side, I can’t see this being a real deal breaker
NH: worth keeping tabs on this one as the chatter is bound to get louder
PM: thanks for at that. clearly one to wach
NH: the other bid of RAW market info - and one we are not taking that seriously at the moment - is of a bid for British Energy
NH: Centrica the name in the frame, said to be about to offer 800p
NH: we have our doubts about that
NH: while Centrica would no doubt love to get its hands on BGY
NH: 800p is just too rich
NH: i suspect they will probably need to team up with a partner to bid for BGY
PM: Hence the stock is off 5.5p at 655p this morning
PM: So we dont buy that one
PM:
PM: Just throw up some breaknig news
PM: sort of breaking…
PM: Tata has been confirmed as the buyer of Jaguar and Landrover
PM: cars, stockbrokers, maybe Alplhaville should follow
PM: Motorola was mentioned below
PM: Splitting up
PM: Carl Ichan got his way
PM: Did you know that Ichan has his own blog?
NH: does he really??
PM: Cant find it now — but he has
PM: Right — we are done
PM: We must go — but thanks for joining us today. Thanks for the comments
NH: i think we are. ih had a call on a little tiddler called International Greetings
NH: very RAW ruumours of a bid approach
NH: stock up stock up 2.25p at 21p
NH: already having a run
NH: so be careful
PM: Bit of wide spread tho
NH: and also Landore
PM: Ah yes, old fav
NH: small mining company Paul has waxed lyrical on before
PM: Nice little performer — IF HIGH RISK
NH: what’s the news
PM: Er…..
PM: Im told we should go and have a proper look at the latest statements on the size of the resource etc.
PM: Full feasibility study still to come tho
PM: And i am naturally a little bit cautious on this one
PM: Right — we are off!
PM: Cheers. Seeya
NH: see you all tomorrow
