FTSE 100 dips despite gains for big oil, BHP requests extension, Pets at Home eyes ‘pivotal year’ and Bloomsbury in US move

“The FTSE 100 started on the back foot on Wednesday after the mood darkened through the course of the day yesterday,” says AJ Bell investment analyst Dan Coatsworth.

“Mixed trading in the US followed a positive reading of US consumer sentiment which, in turn, pushed back on expectations for rate cuts.

“The weakness for the UK’s flagship equity index came despite higher oil prices lifting BP and Shell amid speculation OPEC will maintain supply cuts at its meeting on 2 June. Consumer goods companies, miners and financials acted as a drag on the UK market.

“Bloomsbury has come a long way from the days when its fortunes were almost completely tied to the Harry Potter franchise and today’s acquisition of a US academic publisher accelerates the company’s diversification strategy.”

Royal Mail / International Distributions Services

“The first hurdle has been cleared in Daniel Kretinsky’s attempts to buy the owner of Royal Mail. The price has been agreed and recommended by the board, now comes the hard part in getting the government to approve the deal.

“The big question is which political party is going to be in power to decide, given the general election is only five weeks away. Takeovers often take ages to complete, meaning there is a high chance that Labour will be the one to decide, judging by the latest polls.

“Chancellor Jeremy Hunt has suggested the takeover would not be opposed in principle, but his view might soon be irrelevant. Meanwhile shadow business secretary Jonathan Reynolds welcomed assurances that the proposed new owner of Royal Mail will respect the company’s history and tradition and offered a series of undertakings so as not to rock the boat with the UK operations. Labour says it would take the necessary steps to ‘safeguard its undeniable identity and place in public life’.

“The share price currently trades at 330p, much lower than the 370p per share being offered by Kretinsky. That implies the market doesn’t believe this is a done deal despite the bidder’s promises to retain the brand, UK headquarters and UK tax residency – key things which should appease whichever government is in power.

“Ironically, 330p is exactly the price at which Royal Mail joined the stock market in 2013. Investors expect capital appreciation over time when investing in shares so it’s incredibly disappointing to see the owner of Royal Mail back at the starting line. It’s been a frustrating investment, to say the least.

“Investors will have scooped up dividends along the way and savvy individuals might have enjoyed decent capital gains if they had booked profits in the early days. After all, someone who sold at the 618p peak on 16 January 2014 would have nearly doubled their money from IPO in only a matter of months – the type of investment everyone dreams of scoring. 

“But for many others, Royal Mail’s parent has been a dog of a share, particularly if held for a long time. The recent tick-up in the price because of the bid interest is a saving grace and some investors might be happy to cash out now, thinking their money can be put to better use elsewhere.”

BHP / Anglo American

“Like a desperate student running out of time to hit a deadline, BHP is asking for yet another extension to the cut-off for making a formal bid for Anglo American.

“The company says it has made significant concessions to help get the deal across the line – particularly relating to the sensitive situation in South Africa which has a vested interest in the transaction. With the put up or shut up point being hit today, there is precious little time to waste if the takeover is going to happen.”

Pets at Home

“Shares in Pets at Home, which have been buffeted by weakening demand and a CMA probe into the vet industry, were steady following the company’s full-year results. Profit fell, as expected, but more significantly the company stuck with guidance for what CEO Lyssa McGowan has described as a ‘pivotal year’ ahead as the company launches a new digital platform. 

“It’s no secret that Britons love their pets but while people might still buy the basics, demand for all the little extras like toys and treats, which are lucrative sales for Pets at Home, has waned.

“By offering everything under one roof, including grooming and veterinary services, Pets at Home hopes to drive loyalty and bat off the competitive threat from non-specialists like the supermarkets.”

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