FTSE Gains; Weir To Acquire Linatex

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

The UK markets climb on rising commodity prices. UK-based Weir Group to buy Malaysia-based Linatex group of companies. Majestic Wine quarterly profits surges 242%.

[R]4:30 PM London – The UK markets climb on rising commodity prices. UK-based Weir Group to buy Malaysia-based Linatex group of companies. Majestic Wine quarterly profits surges 242%.[/R]

Resolution to purchase Axa SA''s British operations as part of a plan to build a life insurer valued at £10.0 billion or $14.6 billion. Obama wants BP Plc to set up escrow account to pay for oil spill damages.

In London FTSE 100 Index traded higher 31.70 or 0.61% to 5,195.38 and the pound edged lower to close at $1.462 and close at €1.206.

The UK economy is expected to grow more slowly than the previous government had estimated, according to a report released by the Office for Budget Responsibility today. The budget deficit is forecast to fall more sharply in the years ahead despite slow growth.

The economy is projected to grow 1.3% this year. The gross domestic product is forecast to grow 2.6% in 2011 and 2.8% in 2012. Thus, growth for 2011 and 2012 was lowered from 3.25% and 3.5%, respectively.

The fiscal watchdog forecast the budget deficit to shrink faster than previously forecast. The deficit will fall from the current £155 billion to £71 billion by 2015, a £22 billion improvement from the previous estimate.

The fiscal watchdog sees public sector net debt at 62.2% of GDP this year compared to the previous estimate of 63.6%. Net debt will ultimately reach 74.4% in 2014-15. The public sector net borrowing is expected to drop to 3.9% of GDP in 2014-15 from 10.5% in 2010-11.

Chancellor Osborne already announced £6.2 billion in spending cuts this year.

UK-based Weir Group Plc agrees to acquire the Linatex group of companies, a provider of wear-resistant products to the mining and sand & aggregates industries, based in Kuala Lumpur, Malaysia. The consideration would be $172.5 million or £119.0 million, payable in cash on completion and funded from existing bank facilities.

The acquisition is expected to be accretive from 2011 for Weir and its returns are anticipated to exceed Weir''s cost of capital from the second full year of ownership.

Weir''s chief executive, Keith Cochrane, commented, “By combining Weir''s expertise in pumps, valves and cyclones with Linatex''s renowned rubber products and branding, we will have a highly complementary and competitive offering to satisfy our customers'' demand for leading.”

Resolution Ltd. confirmed that it is in discussions for the acquisition of the majority of AXA SA''s UK life assurance businesses for total consideration of £2.75 billion.

If the deal occurs, Axa will retain its Wealth Management and Direct Protection businesses and sell the remainder of its UK life & savings business to Resolution.

According to the UK-based company, which is a vehicle set up by insurance entrepreneur Clive Cowdery, the consideration is expected to be funded by a pre-emptive rights issue of about £2 billion by Resolution, £0.5 billion of Deferred Consideration Notes issued to Axa and also by acquisition of bank debt.

Resolution intends to merge the acquired Axa businesses with its Friends Provident operations, which were acquired in November 2009. The combined business is expected to have well-diversified distribution channels, through IFAs, direct sales, bancassurance and other sales partners.

President Barack Obama said he wants BP to set up an escrow account to pay for damages for its oil spill in the Gulf of Mexico, according to media sources quoting White House adviser David Axelrod.

White House adviser David Axelrod said ""We want to make sure the money is escrowed for the businesses and want to make sure the money is independently administered so it''s not slow-walked.""

Obama begins a two-day visit tomorrow to assess the situation in the Gulf Coast, and further would be meeting BP''s chairman, Carl-Henric Svanberg, at the White House on June 16.

Obama opined that BP has the resources to meet the claims, and the setting up of an escrow account would be discussed with Svanberg.

Gainers & Losers

3i Group plc, the private equity group rose 0.7% to 290.0 pence.

BP Plc, the oil and gas company fell 3.3% to 378.70 pence.

Carillion plc rose 0.5% to 330.50 pence after the support services company has been awarded a 10-year framework contract to provide facilities management services at Heathrow Airport.

Cineworld Group plc traded unchanged 178.50 pence after the cinema chain and Arts Alliance Media announced they have entered into an agreement which will enable Cineworld to complete the rollout of digital projection facilities across the remainder of its estate in the UK and Ireland.

Dairy Crest Group plc increased 0.9% to 400.80 pence after the milk and cheese company today confirmed that it has reduced its stake in Wexford Creamery Limited from 80% to 30% through a buyback of 1,250,000 shares by the Creamery.

Dana Petroleum plc rose 0.5% to 1,094.00 pence after the independent oil company announced that the company has entered into an agreement to acquire the entire issued share capital of Petro Canada Netherlands BV from Petro Canada Holdings B.V, a wholly owned subsidiary of Suncor Energy Inc. for an estimated net cash consideration of approximately €328 million, approximately £270 million or $393 million.

Kewill plc traded unchanged at 118.75 pence after the logistics software developer announces the acquisition of Minihouse, a Benelux-based software group specializing in the provision of IT software that helps businesses automate customs compliance across Europe.

Majestic Wine PLC rose 5.4% to 290.00 pence after the wine retailer said fiscal year 2010 sales rose 15.6% to £233.2 million from £201.8 million a year ago. Net profit for the year rose 242% to £11.3 million or 18.3 pence per diluted share compared to net profit of £3.3 million or 5.3 pence per share a year ago.

National Grid plc, the electricity and gas company rose 0.7% to 502.50 pence.

Oxford BioMedica plc, the biopharmaceutical company fell 1.0% to 9.90 pence.

Petrofac Limited, the oil & gas facilities service provider rose 1.6% to 1,283.00 pence.

Resolution Limited, the life insurer traded unchanged at 60.30 pence.

The Royal Bank of Scotland Group plc rose 1.7% to 43.12 pence.

SuperGroup PLC, the retailer rose 0.3% to 672.00 pence.

United Business Media Limited rose 0.7% to 521.00 pence after the global business media company today announced in two separate transactions that it has acquired the remaining equity in PR Newswire Brazil and PR Newswire Argentina from the respective private joint venture partners.

United Utilities Group PLC rose 1.6% to 569.00 pence after the utility company today announces that it has agreed to sell its principal non-regulated water interests in the United Kingdom and Europe to Veolia Water UK PLC.

The Weir Group PLC, the engineering group surges 11.63% to 1,061.00 pence.