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UK Equities
Salamander climbs on takeover hopes
From the Financial Times of Tue, 23 Dec 2014 18:48:48 GMT

With 2014 drawing to a close, attention turned to takeovers yet to complete.

Salamander Energy rose 2.7 per cent to 67p on Tuesday, awaiting an update on its talks with Ophir Energy announced in late November.

Salamander shares have been trading at a wide discount to Ophir’s agreed offer of 0.5719 new shares for each Salamander share, reflecting fears that weak oil prices will cause the takeover to fall apart.

While Brent crude at $60 a barrel makes a merger more urgent for Salamander, the benefit to Ophir shareholders is much less clear, said Canaccord Genuity.

The broker said Ophir shareholders not expecting oil to rebound should either vote against the offer or push for a better exchange ratio, which Salamander would be compelled to accept.

“Lower oil prices are a triple-whammy for Salamander, decreasing the likelihood of securing either deal and increasing its debt burden on a standalone basis,” said Canaccord.

“Salamander needs to complete one of the deals on offer, either a corporate sale to Ophir or the partial sale of an interest in the Bualuang field [off coast of Thailand], in order to maintain debt within reasonable limits.”

Ophir edged 1.9 per cent higher at 140.6p, which gave its Salamander offer a readthrough value of 80.4p per share.

Meanwhile, Aer Lingus jumped 7.3 per cent to €2.23 amid talk that IAG, the British Airways owner, had held meetings in recent days to discuss sweetening its takeover offer.

The Irish flag carrier said last week it had rejected an IAG offer — rumoured to have been at least €2.20 a share and potentially as high as €2.35 — saying the price on offer had “fundamentally undervalued” its business.

A wider market rally continued into its sixth day, lifting the FTSE 100 0.3 per cent, or 21.44 points, to 6,598.18. Volume was half the daily average.

Sterling’s retreat to a 16-month low against the dollar helped support exporters such as chip designer Arm Holdings, up 2.3 per cent to 998p.

About 95 per cent of Arm’s royalty revenue is dollar-denominated while half its costs are in sterling, so a 1 per cent change in sterling’s dollar value moves Arm’s earnings per share by 1.5 per cent, Liberum analysts calculate.

Healthcare stocks, among the year’s best performers on M&A hopes, faded with Smith & Nephew down 1.7 per cent to £10.89 and AstraZeneca lower by 1.9 per cent to £45.17.

Shire was down 2.8 per cent to £45.33. US weekly prescription data showed Actavis capturing a 45 per cent of the market for Intuniv, Shire’s once-daily hyperactivity treatment, which lost patent exclusivity at the start of December.

Actavis had agreed in 2013 to delay launching its generic version of Intuniv, which is expected to provide 6 per cent of Shire’s group sales this year.

Indus Gas, the Indian explorer majority owned by Ajay Kalsi, closed 5.1 per cent lower at 278p in scrappy late trading.

The shares were changing hands for just 125p apiece after Arden, Indus’s Nomad, booked a cross trade equivalent to 9 per cent of the group.



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