BP Faces Penalties; UK Money Supply Flat

Arthi Gupta, Mayank Mehta and Sanjay Barot
02 Jun, 2010
New York City

UK stocks fall after U.S. threatens civil and criminal probes against BP Plc. UK construction sees strong growth during May. UK mortgage approvals increase in April but M4 money supply remains flat. Jupiter Investment Management prices IPO.

[R]4:00 PM London, 11:00 AM New York – UK stocks fall after U.S. threatens civil and criminal probes against BP Plc. UK construction sees strong growth during May. UK mortgage approvals increase in April but M4 money supply remains flat. Jupiter Investment Management prices IPO.[/R]

Prudential terminates the purchase of Asian unit with AIG. Hamworthy plc net profit falls 9%. Northumbrian Water Group plc sales rises 2.5%.

In London FTSE 100 Index closed lower 21.80 or 0.42% to 5,141.50 and the pound edged lower to close at $1.466 and edged higher to close at €1.200.

UK construction activity increased during May for a third successive month, according to the latest private report. The Chartered Institute of Purchasing & Supply / Markit construction purchasing managers'' index rose slightly to 58.5 in May from 58.2 in April.

Housing construction activity picked up during May while commercial activity growth slowed. Employment within the UK construction industry also rose in May - the first increase recorded since May 2008.

The number of loans approved for house purchase in the UK totaled 49,871 in April, higher than the March figure of 49,008, according to data released from the Bank of England today.

The total net lending to individuals rose £0.4 billion in April compared to £0.3 billion in March. The twelve-month growth rate was unchanged from a revised 0.8% for March.

UK''s M4 money supply was flat on a monthly basis in April, the Bank of England reported today after rising 0.1% rise in March and 0.2% in February. On an annual basis, M4 money supply was up 3.3%, unchanged from the preliminary report compared an increase of 3.5% in March''s.

Total M4 lending decreased 0.4% month-on-month following 0.3% increase in March. However, the annual growth in April accelerated to 4.3% from 4% in the previous month.

U.S. Attorney General Eric Holder threatened civil and criminal probes against BP Plc. The firm is struggling to mount a cap to slow the oil leaking from a well in the Gulf of Mexico after its ""top-kill"" operation failed over the weekend.

In the latest operation, BP aims to lower a marine riser package containment system to siphon off oil and gas leaking from the damaged oil well in the sea floor to a container ship berthed on the sea surface.

However, chief operating officer Doug Suttles warned yesterday that the operations does not guarantee success as it is conducted under ""5,000 feet of water, and very small issues take a long time to fix.""

BP''s ongoing efforts are aimed at capping the ruptured deep-sea well, at least temporarily, before the hurricane season starts. Weather agencies have warned that winds forecast for later this week could drag the oil spill towards the Mississippi and Alabama coasts, which have until now suffered less environmental damages than Louisiana''s shore.

BP Plc closed lower 25 pence to 429.75 pence.

Prudential plc said it is in negotiations with American International Group, Inc. for the termination of the agreement to acquire AIG''s Asian insurance unit, American International Assurance Co. Ltd.

As per the deal between AIG and Prudential, the total consideration includes $25 billion in cash, $8.5 billion in face value of equity and equity-linked securities, and $2.0 billion in face value of preferred stock of Prudential, subject to closing adjustments. Prudential''s plan was to raise the cash component of the deal through a $20 billion rights issue and $5 billion in senior debt.

Later Prudential tried to reduce the purchase price to $30.38 billion, as its shareholders believed the deal was too expensive.

AIG said yesterday that it would not consider revisions to the agreement terms it reached earlier with Prudential.

Harvey McGrath, Chairman of Prudential, said today, ""While AIA was an excellent opportunity, since we announced the potential transaction we have seen significant falls in the markets. We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG. Unfortunately, it has not been possible to reach agreement so we feel it is in the best interest of our shareholders not to pursue this opportunity. We are therefore withdrawing from the transaction.""

Prudential said today that if the agreement with AIG is terminated, its Board would not put any resolutions to the court and shareholder meetings convened for June 7 and would not be proceeding with the rights issue or other financing related to the transaction.

Under the proposed termination agreement, Prudential will pay AIG a break fee of £152.57 million. Total costs incurred by Prudential in connection with the transaction are estimated to be around £450 million, including the break fee and arrangement and underwriting fees of about £ 81 million. The balance relates to advisory and other fees.

Prudential closed yesterday''s regular trade on the NYSE at $16.53, up $0.92 or 5.89%, on 676,339 shares.

In London trading, Prudential closed up 34.00 pence or 6.28% to close at 575.50 pence.

Jupiter Investment Management, the British fund manager run by Edward Bonham Carter said it will price its shares at between 150 pence and 210 pence, valuing the company at £718 million to £868 million. The asset manager plans to raise about £220 million ahead of a stock market listing.

The proceeds of the float ""will strengthen Jupiter''s balance sheet to a level the directors believe will be beneficial to the business, clients and shareholders over the long-term,"" the company said in a statement.

JP Morgan and Bank of America Merrill Lynch are running the share sale. Under the plan, Jupiter will sell 112.4 million new shares this month.

Gainers & Losers

Acal plc rose 2.5% to 190.00 pence after the provider of technology products and services said fiscal year 2010 revenues rose 10% to £181.6 million from £165.4 million a year ago. Net loss for the year was £6.6 million or 24.5 pence per diluted share compared to net loss of £37.0 million or 140.5 pence per share a year ago.

A.G. BARR Plc rose 1.7% to 990.00 pence after the soft drinks maker reported total revenue for the period from 31 January to 29 May on a like-for-like basis increased 17.9% compared with last year.

Barclays PLC fell 1.9% to 297.35 pence after the global financial services provider announces that its wholly owned subsidiary TAV AB has made a recommended cash offer to acquire all the shares in Tricorona AB for a total consideration of approximately £98 million.

Hamworthy plc fell 1.0% to 277.00 pence after the oil and gas services provider said fiscal year 2010 revenues fell 15% to £214.3 million from £252.8 million a year ago. Net profit for the year fell 9% to £15.1 million or 33.3 pence per diluted share compared to net profit of £16.6 million or 36.5 pence per share a year ago.

Intermediate Capital Group PLC fell 2.0% to 265.00 pence. The investment firm and fund manager said fiscal year 2010 net profit was £81.7 million or 25.0 pence per diluted share compared to net loss of £73.2 million or 35.1 pence per share a year ago.

iomart Group plc rose 4.5% to 57.00 pence after the managed hosting and cloud computing service company said fiscal year 2010 revenues rose 55% to £18.3 million from £11.8 million a year ago. Net profit for the year fell 81% to £2.1 million or 2.12 pence per diluted share compared to net profit of £11.2 million or 11.17 pence per share a year ago.

May Gurney Integrated Services plc rose 3.4% to 210.00 pence after the infrastructure services company said fiscal year 2010 revenues rose 3% to £483.1 million from £470.3 million a year ago. Net profit for the year rose 404% to £13.1 million or 19.25 pence per diluted share compared to net profit of £2.6 million or 3.89 pence per share a year ago.

Northumbrian Water Group plc rose 2.5% to 285.50 pence after the water company said fiscal year 2010 revenues rose 1.5% to £704.7 million from £694.1 million a year ago. Net profit for the year was £112.5 million or 23.62 pence per diluted share compared to net loss of £12.7 million or 2.45 pence per share a year ago.

Petra Diamonds Limited, the international diamond mining group rose 1.2% to 62.00 pence.

Topps Tiles Plc decreased 6.0% to 46.50 pence. The specialist flooring retailer said first half revenues rose 4% to £91.4 million from £87.6 million a year ago. Net profit for the first half rose 3,000% to £6.2 million or 3.31 pence per diluted share compared to net profit of £0.2 million or 0.11 pence per share a year ago.

Trafficmaster plc, the provider of intelligent vehicle services surged 13.4% to 46.50 pence.