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UK Equities
Investors warm to Shire’s independence
From the Financial Times of Thu, 11 Dec 2014 19:08:45 GMT

Two months after a bid from AbbVie collapsed, investors have been feeling more comfortable with the idea of Shire staying independent.

Shire rose 3.1 per cent to £45.65 on Thursday in reaction to the drugmaker’s R&D meeting in New York a day before. The stock has rallied 23 per cent from its lowpoint in October, when AbbVie abandoned a $54bn bid and paid a $1.64bn termination fee.

At the meeting, Shire stuck with guidance of doubling sales to $10bn by 2020 through pipeline development rather than with one transformational acquisition. Analysts have estimated that Shire has the capacity to raise up to $13bn in debt for takeovers.

“These assets remain exceedingly attractive,” Cowan & Co told clients. “There is good duration in the current on-market portfolio, the pipeline appears to hold potential significant value, the annual cash flows are solid, the management team is very talented and appropriately aggressive, and the balance sheet is net cash positive. Few entities look like this.”

Oil and miners dragged the FTSE 100 lower for a fourth straight day, down 0.6 per cent or 38.34 points at 6,461.70. Glencore lost 3.7 per cent to 294.9p, its lowest since mid-2013, in response to news that the miner had raised its 2015 capital expenditure guidance by $1.3bn during an investor day on Wednesday.

Legal & General was up 2.2 per cent to 246.6p after Nomura turned positive in a 2015 insurance sector preview. “We believe the market under-appreciates the strong positive outlook in the group’s key differentiated area of expertise in bulk annuities, and good momentum in other business segments,” it said.

A short squeeze lifted Quindell 9.9 per cent to 36p, which dealers said may have been triggered by this week’s sale of around 24m shares by founder Rob Terry. The cost of borrowing Quindell stock hit its maximum level, Markit data showed, while filings revealed that Roble, a vehicle of US hedge fund Tiger Global, had reduced its short position in the company to 2.72 per cent from 3.92 per cent.

IGas, the UK shale gas developer, lost 14.8 per cent to 39p after Canaccord Genuity raised concerns over its debt levels. The broker, which added a “speculative” tag to its previous “buy” recommendation, forecast that at current oil prices the liquidity and leverage covenants on iGas’s $165m of bonds “could be challenged”.

Canaccord’s concerns overshadowed rumours in the market that IGas is a potential takeover target for a Swiss chemicals company. IGas stock has slumped 75 per cent this year after its chief executive Andrew Austin raised £7m in January with a share transfer to Equities First Holdings, the same specialist lender used disastrously by Quindell’s directors, then reinvested only £400,000 to date on the stock.

IOMart bounced 6.3 per cent to 172.5p amid bid speculation and on an upgrade from N+1 Singer. It argued the cloud computing specialist had been oversold earlier in the week on news of a slowdown at its hosting division.

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