Companies rush to raise money from hungry investors as manufacturing figures increase risk of recession
A SWATHE of gloomy data failed to depress the UK’s buoyant equity markets yesterday, as the FTSE closed at a fresh five-year high and three blue-chip firms rushed to raise a total of almost £1.5bn in less than 24 hours.
RBS, the bank part-owned by the state, last night surprised the market by revealing it was selling a further 15.3 per cent stake in insurer Direct Line, taking advantage of a wave of positive investor sentiment in the City.
The sale of at least 229.4m shares will raise around £500m and take the bank’s share of the firm down to 49.9 per cent or even lower.
The sale puts RBS well ahead of the schedule set by the government in its bailout deal. The bank has to sell off at least half of the insurer by the end of this year and the entire institution by the end of 2014, under the terms.
Direct Line’s shares closed yesterday at 210.2p, well up on the 175p listing price when almost one-third of the insurer was sold for £787m in October.
Interest in 315 of RBS’s is also hotting up, with US private equity firm Centerbridge Partners believed to be considering a bid.
Yesterday Lloyds made a £400m profit from the sale of a stake in wealth manager St James’s Place, taking advantage of the upbeat market.
Meanwhile property giant British Land launched a £500m fundraising plan, placing 87.9m shares to finance an acquisition spree. It also sold Ropemaker Place for £472m, boosting its warchest. Furthermore, it is thought that travel group Thomas Cook is looking to raise £400m in an equity fundraising round, likely to be announced in the coming weeks.
The spurt of market activity comes despite new fears that the UK is in a triple-dip recession, after downbeat manufacturing and production figures were published yesterday.
One source close to the RBS share sale said: “Companies are looking to take advantage of a market that has stormed ahead without any meaningful cause, especially if they need to replenish their capital base.”
UK manufacturing output fell three per cent over the year, while mining and quarrying output plunged 9.3 per cent. And the UK’s 10 year break-even rates, which gauge inflation expectations, rose to the highest level since September 2008, yesterday, prompting fears of stagflation.
Pharmaceuticals led the collapse, plummeting 13.2 per cent in the year to January, the Office for National Statistics found. Rubber and plastics production fell 10.3 per cent, while machinery and equipment output dropped 5.6 per cent.
Despite the weak economic outlook the FTSE 100 closed at 6,510.62, up 0.11 per cent on the day and at its highest level since 2008.