Tate & Lyle shares jump on takeover talk, Morgan Stanley soars as stars align

“It looks like private equity has been lured by the sweet taste of another UK takeover,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“The rumour mill has gone into overdrive on Tate & Lyle being a target for Advent International. It was only a question of time before someone pounced on the business following its radical restructuring. Without the baggage, Tate & Lyle had the right ingredients to become a leaner and healthier business and that appears to have put dollar signs in Advent’s eyes.

“Tate & Lyle sold its sugar business in 2011 and then offloaded its starch operations, leaving it focused on specialty ingredients, making drinks, soups and sauces taste nice. The game plan was that its slimmer portfolio of interests would lead to stronger profit margins, but the recent acquisition of pectin and gum producer CP Kelco confused matters.

“The acquired business had slightly lost its way due to disruptions around expanding production capacity and its profit margins had fallen. While that might only be a temporary factor, the market reaction to the deal wasn’t positive. Some investors took the view it complicated Tate & Lyle’s margin growth story.

“It feels like Advent – if the rumours are correct – spotted an opportunity to run the numbers on Tate & Lyle while it was busy bedding in the CP Kelco deal. Pouncing on a business when it is distracted is par for the course with private equity and the big question now is whether Advent is prepared to offer a fair price to win over shareholders.”

Morgan Stanley

“The investment banking money machine has whirred back into action. Morgan Stanley’s shares surged after the company beat earnings expectations by a wide margin, showed a big improvement with its wealth management arm, and talked up the prospects for more deal-making next year.

“The stars are aligning for the business. Fees from debt deals, equity underwriting and advising on mergers and takeovers are building up. Once the US election is out of the way and we’ve potentially seen another rate cut from the Fed, there might be a flurry of new IPOs and fees from helping companies to float could be added to the mix to give Morgan Stanley another boost.

“It’s quite a change in fortunes for Morgan Stanley and its peers given we’ve been through a couple of years where many big corporations and investors held off dealmaking and undertaking IPOs because of the high interest rate environment.

“Generous returns on cash savings over the past few years meant Morgan Stanley’s wealth management business had major competition as existing and potential clients could park money in the bank and earn decent interest without taking any risks. With cash rates now coming down, Morgan Stanley’s wealth management arm is starting to gain traction with positive net asset flows reported in the third quarter.”

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