ITV Surges on the Back of Private Equity Talk

on Jun 20, 2012

As the FTSE 100 hit a five-week high, ITV’s (ITV) shares went up 2.8 per cent at 74.3p, turning out to be the leading riser in the FTSE 100 albeit well short of the speculated 150p a share bid. ITV’s surge was also boosted by news of a tender offer for up to £250 million of its bonds, which would lower its interest payments. Among the companies said to be running the numbers on the takeover offer was the global private equity firm KKR. And while the talk was considered as speculative, traders said that this could aid a possible takeover of the business by private equity.

Reduced interest costs from the bond buyback would boost 2013 earnings by about three per cent, with more to come if it makes use of the £1 billion of cash on its balance sheet, said broker Panmure Gordon. “Put simply, if ITV optimises its cash/debt mix, there could be more than 12 per cent upside to 2013’s earnings per share other things being equal,” said the broker. “Hopefully this will persuade the stock market that ITV is more than just a play on advertising.”

!m[](/uploads/story/125/thumbs/pic_1_inline.png)Meanwhile stimulus hopes pushed the wider UK market higher for a third straight day. Overall the FTSE 100 finished 95.22 points higher at 5586.31, having climbed as high as 5603 at one point. This was not due to any great expectation of a solution to the euro zone crisis, neither from the G20 meeting, but on hopes that the U.S. Federal Reserve would sanction further stimulus to boost the world’s largest economy after recent downbeat data, analysts said. There was also talk the Bank of England could introduce more quantitative easing, in the wake of benign UK inflation figures.

The software company Sage Group (SGE) was among the top risers this week, adding 3.9 per cent, as it entered the fast growing Brazilian market through the acquisition of a 75 per cent stake in Folhamatic Group, leading brokers to up their expectations for the stock. Other notable risers included insurer Aviva (AV), which was up 4.2 per cent at 277.7p, engineering group Weir WEIR), up 3.2 per cent at 1,551p, and hospitality group Whitbread rising three per cent at 2,026p.

On the other hand, investors sold consumer goods groups Reckitt Benckiser, which was down 1.5 per cent at 3,345p, Unilever which also dropped by 1.5 per cent at 2,044p and oil and gas engineering firm Petrofac, which declined 2.6 per cent at 1,472p. Ex-dividend factors knocked 2.27 points off the FTSE 100 index on Wednesday (June 20), with Experian, Land Securities, Severn Trent, and United Utilities all trading without their payout attractions, which included a special dividend for Severn Trent. WM Morrison was also a notable faller, being down 1.4 per cent as Shore Capital downgraded its rating for the supermarket group to “sell” from “hold”, pointing out that the firm’s trading performance has been causing it growing concerns.

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