While the FTSE finally rediscovered its fizz, SABMiller failed to froth up much despite analysts anticipating a strong start from the brewer’s new Foster’s business.
Last Friday, SAB completed its acquisition of Australia’s Foster’s, which the brewer of Grolsch and Peroni bought for A$11.5bn (£7.3bn) after Foster’s agreed in September to accept a sweetened offer from SAB following a three-month battle by the British brewer to win over management. The A$5.40-per-share offer was an increase from an initial A$4.90-per-share approach.
The deal adds drinks such as Victoria Bitter and Pure Blonde to SAB’s stable and puts it at the head of the Australian beer market, with a near 50pc share.
Nomura analysts were bullish about the tie-up, saying that SAB could look “smart” in a year’s time, entering the Australian beer market at the bottom of the cycle.
Although Australian beer market has been under presure this year, due to factors such as poor weather and consumers reining in their spending, the broker thinks that 2012 could be a “recovery year”. “This could provide good momentum for the [Foster’s] business in its first year under SABMiller management,” added analysts.
The beer market will be helped by a better consumer picture, the broker reckoned, with the Australian economy predicted to grow by 4.6pc next year, partly on a rebound in mining and rural output after the severe weather-related disruption of 2011.
Despite Nomura’s positivity, SAB fell prey to the lethargy bedevilling the market for much of the day, but finally managed to edge up 7½p to £21.83½.
With so much eurozone uncertainty still swilling around, traders were beginning to wind down for Christmas. But having spent the morning struggling for direction, a jump on Wall Street, prompted by data suggesting a nascent recovery in America’s housing industry, helped motivate the benchmark index.
3.40pm: Housing figures spark market rebound
Among the mid-caps, SVG Capital is leading the charge, jumping 34.9 to 200p, after the buyout investor offered to return £170m to shareholders. SVG, which puts 80pc of its capital into Permira, added it would loosen its close ties with the private equity firm.
Listed investors such as SVG have suffered not only from their indirect exposure to heavily indebted private equity-owned companies, but also from the fact they themselves borrowed money to boost performance in their funds.
SVG, seen as a listed proxy for Permira, said it would launch a £50m-tender offer for its shares, priced well above its deeply discounted share price.
The tender is likely to be priced at a 10-20pc discount to net asset value at the end of the year, which some analysts estimate at 300-320p a share.
The remaining £120m will be returned through share buybacks or other tenders, SVG said. It first announced it was considering share buybacks in August.
2pm: Concerns around reforms keep banks under pressure
Banks remained in the doldrums after the Government backed reforms to the banking system, which could cost lenders £8bn.
Royal Bank of Scotland fell 3.2pc after the government called on it to cut the investment banking arm further. Stricter banking regulations and low profitability across the industry had already prompted RBS to sharpen its knife on an investment bank that has halved in size in the last three years. But George Osborne said on Monday: "RBS needs to go further and the management agrees."
Commenting on the reforms, analysts at Nomura said:
These proposals justify our preference for UK-Asian banks over UK domestic
banks, which are operating in a hawkish regulatory environment with a
worsening macroeconomic outlook.
Oriel analysts, who have a "buy" on RBS, Lloyds and Barclays, added:
We maintain the ICB has been focused far more on cure rather than prevention and had any of the ICB recommendations been in place prior to 2007, they would have done very little to prevent the crisis and specifically the failures of Northern Rock, HBOS and RBS Group
10.20am: Ailing drug makers drag on blue-chips
AstraZeneca is under the weather this morning after Britain's second-biggest drug maker revealed it will take a $381.5m pre-tax charge in the fourth quarter of the year following a double blow to its pipeline of new drugs.
Cancer drug olaparib will not progress into final Phase III testing for ovarian cancer due to disappointing results in a mid-stage clinical trial, while the experimental antidepressant TC-5214 failed to meet its goal in a second Phase III study.
Despite the R&D impairment charges - comprising $285 million for olaparib and $96.5 million for TC-5214, reflecting its reduced chance of success - AstraZeneca still expects to hit its target for 2011 earnings.
But it said core earnings per share, which exclude certain items, would now be in the lower half of the previously indicated range of $7.20 to $7.40.
AstraZeneca will review its plans for TC-5214 in the light of full results of remaining studies, which are expected in the first half of 2012. A potential submission for U.S. approval is still possible for the drug in the second half of 2012, with a European filing in 2015, it said.
Analysts at Deutsche kept their "hold" rating on Astra, saying:
Today's news does not change our stance on AstraZeneca which is that it
faces a crunch year for Crestor (post the genericisation of Lipitor) and
Brilinta (quarterly sales need to start picking up if l-t consensus sales
forecasts of close to $2bn are not going to be cut back). Disappointments on
one or both, especially if the residual late-stage pipeline does not deliver
(notably oral RA drug fostamatinib, Phase IIII date due mid-year), could
well prompt a change in group strategy in our view.
The double dose of bad news sent Astra's shares down 67p to £28.82 and its peer, GlaxoSmithKline, slipped 20.5 to £14.29 in sympathy.
8.30am: European shares retreat
Eurozone ministers agreed on Monday to boost the IMF's resources by €150bn to help tackle the debt crisis, but it was unclear if the bloc would reach its overall €200bn target after Britain bowed out.
This has created doubts about whether the scheme would work with London, Washington and Germany's Bundesbank unenthusiastic. The increase in the IMF resources was seen as vital to boosting the firepower of Europe's bailout fund, which is too small to handle the region's debt problems.
Attention is gradually switching to Wednesday's first offering by the European Central Bank of low-cost, three-year funds to the region's banks, which some hope will encourage them to buy high-yielding Spanish and Italian bonds while other believe will be used instead to repair their balance sheets.
Miners and energy companies were the biggest fallers, with Glencore, Xstrata, Rio Tinto and BP falling betwen 1.17pc and 0.9pc.
Other fallers were Glaxo (-1.4pc) and BAE Systems (-1pc).
IAG, the airline group the includes British Airways and Iberia, was the biggest riser, up 1pc.
Earlier, most Asian stock markets bounced back as fears receded of political turmoil in the region following news of North Korean leader Kim Jong Il's death yesterday.
Kim Jong-il's body lies in state in a glass coffin in Pyongyang
Investors appeared relieved that Kim's death from a heart attack had not triggered an immediate crisis over a leadership succession in the isolated nation known to be pursuing nuclear weapons.
North Korea's neighbours worry that internal political maneuvering could spill over into missile launches or other aggression, though analysts give such acts a low probability.
But gains were kept in check after Australia's central bank expressed fears of a weakening global economy.
"Yesterday we had a little bit of a scare with the North Korea situation," said Jackson Wong, a vice-president at Tanrich Securities. But today, "the market actually bounced back nicely".
Mr Wong said investors in Hong Kong and mainland China were also hopeful that policymakers in Beijing may announce measures as soon as this weekend to help bolster economic growth following recent signs of weakness.
Monday's market report
Betting businesses play their cards right
FTSE live: market report - as it happened December 19, 2011
Friday's market report
FTSE live: market report - as it happened December 16, 2011
Thursday's market report
BP rumoured to be talking to Ophir Energy
FTSE live: market report: as it happened, December 15, 2011
Wednesday's market report
