Direct Line Insurance shares are back in the takeover spotlight after the Green Flag owner rejected a £3.3 billion approach by Aviva.
One deal that has received support is the £338 million tilt for Loungers, with the bars chain highlighting small-cap illiquidity as one reason for backing US investor Fortress.
In corporate results, Dr Martens shares have risen sharply after it reassured on current trading alongside a half-year loss of £28.7 million.
FTSE 100 Live Thursday
- Direct Line rejects Aviva approach
- Loungers backs £338m takeover
- Dr Martens posts big loss
Market update: Direct Line up 41%, City upgrade boosts FTSE 100 grocers
10:26 , Graeme EvansA £3.3 billion takeover move by Aviva today sent Direct Line shares 41% higher in a session when fellow car insurer Admiral topped the FTSE 100 index.
Direct Line, the owner of brands Churchill and Green Flag, told Aviva yesterday that its “highly opportunistic” approach substantially undervalued the business and its prospects.
The proposal tabled on 19 November valued Direct Line at 250p a share, a near 60% premium that was made up of 112.5p in cash and the rest in Aviva shares.
Direct Line, which is midway through a plan to revive its fortunes, also rejected the interest of Belgium’s Ageas in March.
Its FTSE 250-listed shares today jumped 64.8p, still some way short of the indicative offer price, at 223.5p.The stock last traded at 250p in summer 2022, having fallen as low as 135p last year.
Analysts at Peel Hunt said: “The rejection of Aviva’s proposal reflects the board’s confidence in Direct Line’s standalone outlook but we still believe engaging with Aviva makes sense.”
They suggested a figure in the range of 260p-265p could be more tempting, noting the potential downside risks attached to the turnaround.
Aviva today fell 2.5% or 12.4p to 476.9p, having been on a strong run since an update earlier this month. The valuation read-across for Admiral shares meant the insurer topped the FTSE 100 with a rise of 3% or 85p to 2549p.
Investors also circled the supermarket sector after JP Morgan upgraded its stance on Tesco and Sainsbury’s from Underweight to Overweight.
Tesco rose 8.2p to 366.1p as the City firm hiked its price target from 270p to 410p. Sainsbury’s, which owns Argos, lifted 7p to 260.4p on the back of JP Morgan’s new valuation estimate of 310p.
The thermal energy management firm Spirax also benefited from City support, lifting 230p to 7130p after Citigroup revealed a 8600p target price.
Other stocks in demand in London’s top flight included JD Sports Fashion, which rose 3% or 3.4p to 105.05p, and Diageo after a rise of 42p to 2397p.
The FTSE 100 index rose 19.57 points to 8294.32, while the FTSE 250 index lifted 0.8% or 160.79 points to 20,762.42.
Alongside Direct Line at the top of the mid-cap benchmark, Dr Martens jumped 16% amid relief at unchanged guidance in half-year results.
The bootmaker reported a loss of £28.7 million but said trading in the build up to its peak season has been encouraging.
Kenny Wilson, who is stepping down as chief executive, said: “This is a year of transition and we have made good progress with our four main objectives.”
The shares, which have slumped after a series of profit warnings mainly linked to its US operations, rose 9.1p to 66.9p. They were 428p at the start of 2022.
Market update: Direct Line up 41%, City upgrade boosts FTSE 100 grocers
10:22 , Graeme EvansA £3.3 billion takeover move by Aviva today sent Direct Line shares 41% higher in a session when fellow car insurer Admiral topped the FTSE 100 index.
Direct Line, the owner of brands Churchill and Green Flag, told Aviva yesterday that its “highly opportunistic” approach substantially undervalued the business and its prospects.
The proposal tabled on 19 November valued Direct Line at 250p a share, a near 60% premium that was made up of 112.5p in cash and the rest in Aviva shares.
Direct Line, which is midway through a plan to revive its fortunes, also rejected the interest of Belgium’s Ageas in March.
Its FTSE 250-listed shares today jumped 64.8p, still some way short of the indicative offer price, at 223.5p.The stock last traded at 250p in summer 2022, having fallen as low as 135p last year.
Analysts at Peel Hunt said: “The rejection of Aviva’s proposal reflects the board’s confidence in Direct Line’s standalone outlook but we still believe engaging with Aviva makes sense.”
They suggested a figure in the range of 260p-265p could be more tempting, noting the potential downside risks attached to the turnaround.
Aviva today fell 2.5% or 12.4p to 476.9p, having been on a strong run since an update earlier this month. The valuation read-across for Admiral shares meant the insurer topped the FTSE 100 with a rise of 3% or 85p to 2549p.
Investors also circled the supermarket sector after JP Morgan upgraded its stance on Tesco and Sainsbury’s from Underweight to Overweight.
Tesco rose 8.2p to 366.1p as the City firm hiked its price target from 270p to 410p. Sainsbury’s, which owns Argos, lifted 7p to 260.4p on the back of JP Morgan’s new valuation estimate of 310p.
The thermal energy management firm Spirax also benefited from City support, lifting 230p to 7130p after Citigroup revealed a 8600p target price.
Other stocks in demand in London’s top flight included JD Sports Fashion, which rose 3% or 3.4p to 105.05p, and Diageo after a rise of 42p to 2397p.
The FTSE 100 index rose 19.57 points to 8294.32, while the FTSE 250 index lifted 0.8% or 160.79 points to 20,762.42.
Alongside Direct Line at the top of the mid-cap benchmark, Dr Martens jumped 16% amid relief at unchanged guidance in half-year results.
The bootmaker reported a loss of £28.7 million but said trading in the build up to its peak season has been encouraging.
Kenny Wilson, who is stepping down as chief executive, said: “This is a year of transition and we have made good progress with our four main objectives.”
The shares, which have slumped after a series of profit warnings mainly linked to its US operations, rose 9.1p to 66.9p. They were 428p at the start of 2022.
FTSE 100 higher, Admiral and supermarkets rally
08:45 , Graeme EvansThe FTSE 100 index has risen 17.76 points to 8292.51, led by car insurer Admiral on the read-across from last night’s Direct Line takeover disclosures.
Admiral rose by 3% or 81p to 2545p, while other strong performers included supermarkets Tesco and Sainsbury’s after gains of 8p to 365.9p and 7.4p to 260.8p respectively.
Thermal engineering firm Spirax rallied 3% or 245p to 7145p and JD Sports Fashion improved by 2.5p to 104.15p.
The FTSE 250 index added 0.6% or 122.27 points to 20,723.90, with Dr Martens up 14% or 8.2p to 66p as investors reacted to a reassuring set of half-year results.
Direct Line up 36% after takeover approach, Aviva down 2%
08:28 , Graeme EvansDirect Line Insurance shares are up 36% or 57.5p to 216.2p, which compares with the 250p valuation tabled by Aviva in its unsuccessful takeover approach.
FTSE 100-listed Aviva fell 8.8p to 480.5p, still sharply higher than the 453p at the start of November.
Aviva’s £3.3 billion cash and shares proposal, which was rejected yesterday by the Direct Line board, comes after Belgium’s Ageas failed to acquire the business earlier this year.
Deutsche Bank said today: “We value Direct Line at 220p a share, and even without a takeover bid, like the shares on a 12 month view.
“Meanwhile, we see this as adding confidence to the UK personal lines space, and can see bottom-line synergies for Aviva, even if this could put pressure on its 2025 buyback.”
Peel Hunt added: “Aviva could be persuaded to sweeten the deal to 260p-265p, which may help satisfy the DLG board.
“There is downside risk to DLG’s standalone strategy and retaining some upside in an Aviva-DLG combination could be an attractive proposition, which is worth exploring in our view.”
Scholium to cancel listing after decade on AIM
08:08 , Graeme EvansRare books firm Scholium has revealed plans to quit the London stock market.
The company, which has a market value of £5 million and joined AIM in March 2014, estimates that the cancellation could reduce its overheads by at least £75,000 a year.
This figure relates to professional adviser fees, stock exchange related expenses and other costs associated with the running of a quoted company.
It points out this reduction would have increased pre-tax profits in the 2023/24 financial year by at least 25%.
The company said the cost savings will enable “greater investment in the business and an opportunity to pay dividends to shareholders.”
Over the last 30 months the mid-price of each Scholium share has not exceeded 45p, representing a large discount to net asset value that has “significantly hampered the ability of the group to grow by acquisition”
Subject to shareholder approval, the cancellation of the listing will take place on 6 January.
The announcement came as Scholium recorded its seventh consecutive profitable half year, a period that included the transition to the company’s new single flagship property in Bond Street for both books and art.
Loungers backs £338m takeover amid small-cap illiquidity
07:50 , Graeme EvansThe Loungers bar and restaurant chain has been snapped up by a New York investment firm Fortress, which already owns the Punch pub company and Majestic Wine.
The deal came as Loungers, which has around 270 locations under the Lounge, Cosy Club and Brightside brands, revealed half year sales up 19% at £178.3 million and pre-tax profits more than 50% higher at £5.9 million.
The offer price of 310p a share in cash is a 30.3% premium to last night’s closing price of 238p and worth a total of £338.3 million. The share price has never been higher than the offer price.
The Loungers board said a lack of liquidity in its shares had been one of the factors in the decision to sell as this made it “challenging to attract new investors or for larger Loungers shareholders to monetise their holdings.”
The statement said: “The Loungers directors believe that this illiquidity is a structural issue inherent to many UK small-cap stocks.”
The company adds that Loungers' strong growth has not been reflected in its market valuation. The company opened its first site in Bristol in 2002.
Aviva rejected after Direct Line takeover approach
07:27 , Graeme EvansThe disclosure by Aviva that it has made a 250p-a-share takeover proposal to Direct Line Insurance represents a 57.5% premium to last night’s closing price.
The board of the Churchill and Green Flag business described the cash and shares proposal as “highly opportunistic” and one that substantially undervalued the company.
Under takeover rules, Aviva has until 25 December to make a firm offer. Direct Line shares last traded at 250p in July 2022, having fallen as low 135p last year.
Panmure Liberum said this morning: “We believe that an offer at around 250p per share or slightly above is good for Direct Line shareholders.”
Dr Martens racks up £28.7m loss
07:17 , Graeme EvansBootmaker Dr Martens has reported half-year results in line with expectations, including an 18% decline in revenues to £324.6 million.
The reduced top line figure and exceptional charges of £9.2 million, largely due to its cost savings plan, led to an adjusted loss of £17.9 million. The bottom-line figure stood at £28.7 million.
Kenny Wilson, who is stepping down as chief executive, said: “This is a year of transition and we have made good progress with our four main objectives.”
The company described trading over recent weeks as encouraging, with all three regions positive ahead of the peak season.
It added: “Encouragingly, trading has been driven by good direct-to-consumer sales of new products supported by our new product-led marketing approach.”
US markets lower on inflation worries, Aviva in focus after Direct Line approach
07:03 , Graeme EvansInflation jitters halted the strong run for US markets last night, with the Dow Jones Industrial Average down 0.3% after earlier touching 45,000 for the first time.
The S&P index also retreated from record territory with a decline of 0.4%, while the Nasdaq Composite lost 0.6%.
The selling amid thin volumes ahead of the Thanksgiving holiday followed a strengthening in the Federal Reserve’s preferred measure of inflation.
The FTSE 100 index rose 0.2% yesterday and is forecast to open eight points higher at 8283 this morning.
Aviva shares will be closely watched after the insurer last night announced an unsuccessful takeover approach to Direct Line worth £3.3 billion.
