United kingdom Daily news: MARKET REPORT: Industrial engineer Smiths Group eyed by equity vultures

MARKET REPORT: Industrial engineer Smiths Group eyed by equity vultures

By Geoff Foster

PUBLISHED: 16:24 EST, 21 June 2012 | UPDATED: 16:24 EST, 21 June 2012

As the acrid smell of burnt fingers wafted around the City and flabbergasted dealers called for a â€˜stewardsâ€™, shares of Invensys plummeted to 206.26p before closing 37p or 14.4pc lower at 220p.

The drop followed Invensysâ€™ belated decision yesterday to finally inform the London Stock Exchange that it had received an abortive bid approach from Emerson Electric of the US.

Undeterred, many professional punters turned their attentions to another old takeover favourite. They piled into industrial engineer Smiths Group, chasing the stock up to 1047p on revived talk of a private equity cash bid at a significant premium to the current price before a close of 1030p, up 4p. Turnover swelled to 13million.

MARKET REPORT: Industrial engineer Smiths Group eyed by equity vultures

Private equity vultures are believed to have been hovering above Smiths ever since its board last year rejected a Â£2.45billion bid approach from Apax for its medical devices business, saying the deal was not â€˜in the interests of shareholdersâ€™.

Not long after that, the Smiths board had to warn that the second-half performance of its Detection business, which makes X-ray scanners used at airports and accounts for almost 20 per cent of sales, had fallen short of expectations due to delayed orders.

But what makes speculators confident that Smiths will be a likely bid target in the short-term is that wheeler-dealer Philip Bowman is chief executive.

He joined in September 2007 and could now be getting itchy feet. He sold drinks giant Allied Domecq to Pernod Ricard for Â£7.65billion and while at Scottish Power agreed its sale to Spainâ€™s Iberdrola. Smiths Group would make a formidable hat-trick.

Already in retreat on disappointment that Ben Bernanke and the Fed extended â€˜Operation Twistâ€™ instead of pumping more liquidity into the system and weaker-than-expected manufacturing data from China, the Footsie fell away further following a series of reports from the US that manufacturing, employment and housing growth all remain below par. It closed 55.93 points lower at 5,566.36, while the FTSE 250 shed 78.15 points to 10,944.66. Wall Street traded around 250 points down towards the end of the day.

Dealers were relieved to hear that a Spanish debt auction had got away safely but were not happy to see five-year borrowing costs trade at a 16-year high of 6.07 per cent.

Talk of a pending upbeat circular lifted household goods giant Reckitt Benckiser 52p to 3419p.

Unilever rallied 18p to 2080p on reassuring comments by Liberum Capital. Analyst Martin Deboo says it is a company that is gaining momentum rather than losing it, whose input pressures are getting better rather than worse, who is relatively less exposed to slowing geographies and who is less of a hostage to guidance fortune.

Miners reacted to news that Chinaâ€™s factory sector contracted for an eighth straight month in June. Fears that a weakening Chinese economy could threaten demand for metals left Anglo American 114p down at 2101p, Vedanta Resources 48p easier at 930p and Lonmin 34p off at 756p.

Down more than 60 per cent over the past three months, Aquarius Platinum fell 6.5p further to a 52-week low of 53.2p. The worldâ€™s fourth-largest producer, which last week said it was to suspend operations at its Marikana joint venture which produced 53,000 ounces of platinum in 2011, yesterday announced it would close operations at its Everest mine, which contributed 21pc to group production last year â€" 100,000 platinum ounces.

Finance director Martin Payneâ€™s purchase of 300,000 shares at 11.96p in the wake ofÂ satisfactory annual results helped Norcros improve 0.38p to 11.5p. The home consumer products group has completed bank refinancing, securing a Â£51million bank facility on improved terms until October 2015.

Discount airline easyJet firmed 4p to 536p following an Oriel Securities buy recommendation. The broker reckons the decision to shut its Madrid base yet continue to serve the area will bolster investor confidence that its management is committed to improving returns.

Jet2.com and Jet2Holidays owner Dart Group added 0.88p to 69p after reporting higher full-year revenues and profits as passengers at its package holiday business more than doubled over the period. Peel Huntâ€™s target price is 98p and says the potential for a re-rating remains substantial.

Shanta Gold rose 2p to 22.12p on hearing that it has reached a significant milestone with its flagship asset, the New Luika Gold Mine in Tanzania, and that plant commissioning is under way and on track for first gold production in August. Initial estimates suggest it will produce between 13,000-17,500 ounces of gold in the fourth quarter of 2012.

- Today sees the arrival on AIM ofÂ e-commerce business Global Market Group, at 130p, With a market value of Â£127million, it is the largest Chinese company to join this year and should attract a good following. It is a leading business-to-businessÂ e-commerce service provider that has developed an online marketplace to link international buyers with accreditedÂ high-quality manufacturers in China.