GKN Fails to Fuel a Footsie Flurry; MARKET REPORT

Daily Mail (London), September 22, 2010 | Go to article overview

GKN Fails to Fuel a Footsie Flurry; MARKET REPORT


Byline: by Elliot Wilson

NATURE abhors a vacuum, as do the markets.

And so, lacking any sort of direction on a day when stocks struggled to find their equilibrium, investors turn to a long-trusted currency: gossip-mongering and tittle-tattle.

Recent days have seen a flurry of acquisition rumours, few of which have as yet borne fruit. The latest company in the frame is GKN, whose suddenly elevated position as a takeover target is curious.

The car-parts maker is reasonably well run and is manfully struggling to reduce its pension liability, which stands at [pounds sterling]765m. But is it overpriced? Some investors clearly think so - even talk of a bid failed to sustain a share price that inched up 3.4p in the morning before ending down 0.8p at 167.6p.

Many investors clearly believe that a stock which was a steal when bumping along at around 100p in February is now something to avoid. Much of the scuttlebutt seems to come from the fact that GKN is a direct rival to Tomkins, the engineering group that recently voted in favour of a [pounds sterling]2.9bn takeover by a Canadian consortium. In a neatly ironic twist, GKN is also the company in line to replace Tomkins in the FTSE 100 if and when the latter's de-listing takes place.

Yet not everyone is sure. Noted one analyst: 'GKN is benefiting from money flooding out of Tomkins and seeking a similar place to invest, that's for sure. But some of that money believes that GKN could be sold. It's not an outlandish idea.' The analyst highlighted several rivals as potential buyers, notably Johnson Controls, Magna International, and ArvinMeritor. 'If my heart could bet on the likelihood of this deal getting done I'd put it at 40pc. But with the sell-off of British industry seeming to speed up, my head might say 60pc.' Overall the Footsie endured a rather curious day, rising by nearly 1pc in morning trading before stalling and falling. It ended down 26.35 points at 5576.19 despite positive news from America, where housing starts hit a four-month high.

Takeover talk seemed to pierce every level of the index. British Gas owner Centrica is believed to be lining up a counter bid of around 450p-480p for International Power (up 1.8p at 388.6p), which has recently sealed a tie-up with France's GDF Suez.

Meanwhile Wellstream, a Newcastle-based maker of flexible pipes for the offshore oil industry, is seen as being a target for a gaggle of larger international rivals including Saipem, National Oilwell Varco and Aker Solutions. …

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