Vodafone deal talk sends FTSE back to highs

THE UK’S top shares closed sharply higher yesterday as a return of M&A fervour, after heavyweight Vodafone was reported to be the subject of a multi-million pound breakup bid, helped propel shares back towards 2013 highs.

Vodafone rose 2.9 per cent after the Financial Times Alphaville blog cited “usually reliable people” as saying that Verizon Communications and AT&T had been working together on a breakup bid for the group.

The bid would be pitched at about 260p a share, around a 40 per cent premium to the current price for Vodafone, the world’s second largest mobile operator.

“Although much of the news is now in the share price, Tradenext ... will continue to add on any dips. Any inkling of a bid from Verizon will almost certainly drive the shares above 200p,” Ronnie Chopra, head of strategy at Tradenext, said.

Vodafone’s shares are up around 20 per cent in 2013 on persistent M&A talk. Its weighting accounts for around six per cent of the entire FTSE 100 and the company’s shares added nearly 10.5 points alone to the index

London’s blue chip index closed up 78.92 points or 1.2 per cent at 6,490.66, approaching the 6,533.99 level reached in March, which was this year’s intraday high and its highest level since January 2008.

Interdealer broker Icap, hit hard by a recent profit warning, rebounded 6.1 per cent after traders reassessed the company’s value following a move by US exchange operator Nasdaq to buy rival electronic Treasuries-trading platform eSpeed from BGC Partners.
British airways owner IAG, which is in talks to buy Spanish budget airline Vueling, climbed 2.9 per cent, while Britain’s number four grocer Wm Morrison Supermarket, which is seeking a tie-up with Ocado, added 2.5 per cent. “I do not think there is an M&A premium in the market at the moment, but (if M&A picks up) ... that (bid premium) could push the market even higher,” said James Humphreys, senior investment manager at Duncan Lawrie Private Bank.

A revival in M&A activity and continued stimulus measures from world central banks helped equity markets rise in early 2013, despite a resurgence of the euro zone debt crisis which saw Cyprus bailed out on tough terms last month.

“The year has begun with a bit of a bang as far as equity markets are concerned. Though the strength of returns has caught many investors out, the small number of negative days has broadly been seen as opportunities to buy,” Ian Heslop, at Old Mutual Global Equity Fund, said.

The FTSE 100 climbed again after a peak-to-trough fall of 2.3 per cent towards the end of March on concerns over contagion within Europe.