London midday: Stocks flat but Renewi, Direct Line surge on deal news

(Sharecast News) - London stocks had pared earlier gains to trade flat by midday on Thursday, but Renewi and Direct Line powered ahead on deal news.

The FTSE 100 was steady at 8,277.05 on what was set to remain a fairly quiet session as US markets will be closed for Thanksgiving.

Investors were mulling a survey which showed that UK consumer confidence remained largely unchanged following the Budget, weighed down by ongoing concerns about the strength of the economy.

According to the latest consumer sentiment monitor from the British Retail Consortium, expectations for personal finances over the next three months improved slightly, ticking up to -3 in November from -4 in October.

People also expected to spend more on retail over the next three months, with the measure rising to 3 from 2.

However, expectations for the wider economy weakened, easing two points to -19, while personal spending overall was unchanged at 17.

Helen Dickinson, chief executive of the BRC, said: "There was little shift in consumer confidence since the Budget, with many worried about the economy in the lead up to Christmas.

"While there was a very slight improvement in people's expectations of their personal financial situation, this was offset by declining expectations of the wider economy.

"The last month clearly did little to shift the dial for households, either positively or negatively."

Christmas is a crucial time for most retailers as consumer spending traditionally rises notably over the so-called golden quarter.

In equity markets, Renewi rocketed as the waste management firm said it was minded to recommend a £700m takeover proposal from Australian investment firm Macquarie Asset Management, should a firm offer be made.

Responding to earlier press speculation, Renewi said Macquarie had offered 870p per share in cash. This is a premium of 57% to the closing share price on Wednesday.

Direct Line also surged after it said late on Wednesday that it had rejected a £3.3bn takeover proposal from Aviva.

Aviva offered 112.5p per share in cash and 0.282 new Aviva share, valuing the group at 250p per share. This is a 59.7% premium to the closing Direct Line share price on 18 November, which was the day before the proposal was submitted.

Direct Line dismissed the offer as "highly opportunistic", saying that it "substantially undervalued the company".

Jefferies said in a research note that a higher takeover proposal from Aviva might be forthcoming.

The bank noted that this was the third bid rejected by Direct Line this year, after it rejected two approaches from Belgium's Ageas, the first at 233p a share and the second at 237p a share.

Jefferies pointed out that the offer from Aviva is 7.2% above Ageas's first offer and 5.4% above their second.

"Given that this is a relatively small uplift from the previous two offers, and the consideration is similarly split between cash and shares, we are unsurprised that the bid was rejected," it said. "Previously, we suggested that the capital and expense synergies available to an acquirer mean that an offer of at least 270p would be more realistic.

"With this in mind, while we agree with Direct Line's rejection of the offer, we do believe that a higher offer might be forthcoming if the board considered engaging with Aviva."

Insurance peer Admiral gained, but Aviva slumped.

Spirax-Sarco shot to the top of the FTSE 100 after an upgrade to 'outperform' at BNP Paribas Exane and an initiation at 'buy' at Citi, which also started Smiths Group at 'buy' and Halma at 'neutral'.

Sainsbury's and Tesco were also high risers after double upgrades at JPMorgan Cazenove to 'overweight' from 'underweight'.

Troubled footwear maker Dr Martens rallied as it said it swung to a loss for the half year but that trading since the start of the autumn/winter season had been "encouraging", and held guidance for the 2025 fiscal year.

Pre-tax losses came in at £28.7m for the six months to September, compared with a £25.8m profit a year earlier. Revenue fell 18% to £324.6m.

On the downside, Imperial Brands, United Utilities, Severn Trent, Land Securities, 3i Group and Ithaca Energy all fell as they traded without entitlement to the dividend.

Tullow Oil fell sharply as it said it was on track to meet full-year production guidance but that free cash flow would be below previous guidance due to timing of payments.

Energean was also in the red as it hailed "strong" third-quarter trading, with improved earnings and a jump in production, but also said full-year total production from continuing operations would be below previous guidance.

Food producer Cranswick was hit by downgrade to 'sector perform' from 'outperform' at RBC Capital Markets.

Market Movers

FTSE 100 (UKX) 8,277.05 0.03% FTSE 250 (MCX) 20,730.65 0.63% techMARK (TASX) 4,696.91 0.05%

FTSE 100 - Risers

Spirax Group (SPX) 7,110.00p 3.04% easyJet (EZJ) 554.20p 2.97% Admiral Group (ADM) 2,531.00p 2.72% Sainsbury (J) (SBRY) 260.00p 2.60% JD Sports Fashion (JD.) 104.15p 2.46% Entain (ENT) 802.40p 2.45% International Consolidated Airlines Group SA (CDI) (IAG) 260.50p 2.12% Barclays (BARC) 264.15p 2.01% Kingfisher (KGF) 253.30p 1.81% DCC (CDI) (DCC) 5,780.00p 1.58%

FTSE 100 - Fallers

Aviva (AV.) 473.80p -3.17% Vistry Group (VTY) 658.50p -2.44% Severn Trent (SVT) 2,694.00p -2.11% Land Securities Group (LAND) 609.50p -2.01% Imperial Brands (IMB) 2,584.00p -1.94% United Utilities Group (UU.) 1,113.50p -1.89% British American Tobacco (BATS) 2,967.00p -1.43% Haleon (HLN) 374.60p -1.37% Berkeley Group Holdings (The) (BKG) 4,234.00p -1.12% SEGRO (SGRO) 780.40p -1.04%

FTSE 250 - Risers

Renewi (RWI) 800.00p 44.40% Direct Line Insurance Group (DLG) 226.40p 42.66% Dr. Martens (DOCS) 64.60p 11.76% TI Fluid Systems (TIFS) 188.00p 5.03% Raspberry PI Holdings (RPI) 346.20p 3.34% OSB Group (OSB) 392.00p 2.30% Pets at Home Group (PETS) 235.00p 2.17% Close Brothers Group (CBG) 218.40p 2.15% SSP Group (SSPG) 161.20p 2.09% TBC Bank Group (TBCG) 3,225.00p 2.06%

FTSE 250 - Fallers

Ithaca Energy (ITH) 107.00p -10.98% Energean (ENOG) 1,025.00p -6.39% Ocado Group (OCDO) 317.40p -2.34% Foresight Group Holdings Limited NPV (FSG) 440.00p -2.22% Bellway (BWY) 2,486.00p -1.89% PayPoint (PAY) 831.00p -1.66% Fidelity Emerging Markets Limited Ptg NPV (FEML) 666.10p -1.61% Quilter (QLT) 144.30p -1.23% Mitchells & Butlers (MAB) 246.00p -1.20% Cranswick (CWK) 4,930.00p -1.20%