Markets up on hopes for Biden-Putin summit, and UK takeover spree continues with a move on Clipper Logistics and a higher bid for John Menzies

“The market remains hopeful that Russia will step back from the precipice in Ukraine with news of a potential last-gasp summit between Putin and Biden lifting sentiment on Monday,” says AJ Bell Investment Director Russ Mould.

“Like everyone else investors are left scratching their heads trying to decipher what the Russian leader’s end-game is and until that becomes clear then nervousness is likely to remain.

“In recent days and weeks, oil prices have bubbled higher in anticipation of the supply disruption that a Ukrainian conflict would bring, and gold has moved higher as people seek out safe havens. Both eased back at the start of the new week, but further volatility looks almost a given at this stage.

“There’s little in terms of big economic news to shift attention away from Russia-inspired tensions – though a second estimate of US GDP for the fourth quarter may capture some attention on Thursday.

“However, full-year results season in the UK hots up as the banks continue to report and other heavyweights like BAE Systems, WPP and Rio Tinto unveil their numbers.

“The banks have got off to a bit of a soggy start, with a weak reaction to Natwest’s earnings last Friday. While higher rates should boost profitability, Natwest offered a painful reminder that mounting inflation will affect the cost base too.”

Clipper Logistics / John Menzies

“The fight for UK assets by foreign companies continues apace with two targets in the services sector looking as if they will be the next ones gobbled up.

“Clipper Logistics is in the sights of US firm GXO and Kuwait group NAS has just increased its offer again for aviation services group John Menzies. Both takeovers may sense strategically as they would complement the predators’ existing expertise and increase their scale in important markets.

“The UK stock market may have a reputation being full of old economy companies and generally lacking the supercharged levels of growth seen in US tech space. However, what’s underappreciated is the plethora of small and medium-sized business which have carved out a niche and become important players.

“Clipper Logistics has made a big name for itself in recent years by being the brains and muscle behind e-commerce return services for most of the big UK retailers.

“Fashion sellers have had to contend with customers buying multiple sizes of clothes and then sending back the ones that don’t fit. The ease at which someone can return an item has become an important selling point when trying to capture online business. Clipper Logistics has been the cog in the machine that enables smooth returns and repackaging to help get the items sold once again.

“GXO was spun out of US services group XPO Logistics last year and is now eager to make a name for itself as a standalone business, with ambitious management seeing the value in adding Clipper to its operations.

“It’s been four years since John Menzies sold its newspaper distribution arm to fully focus on aviation services including cargo handling. Life hasn’t been easy in recent years and pandemic disruption left the share price trading on depressed levels which attracted an opportunistic takeover bid.

“The offer has since been increased several times and NAS has now tabled its final offer of 608p per share which puts the stock price at levels last seen in August 2018 and more than double the level before bid interest was first disclosed in early February.

“With the UK market still trading on a cheaper level relative to other places like the US, we’re likely to see further takeover action. That may be good for investors in that it provides a short-term boost to the value of their assets, but longer-term this isn’t necessarily good for someone’s wealth or indeed the reputation of the market if the pool of companies is shrinking.

“A decent business should generate attractive returns for investors over a long period so giving it up just for a quick 20% to 40% bid premium isn’t always a wise move for someone with a long-term investment horizon.”

These articles are for information purposes only and are not a personal recommendation or advice.