Meggitt's 'too expensive to buy' label hurts

A cautious take on recent takeover speculation meant Meggitt was among Thursday's biggest fallers.

The appointment of dealmaker Sir Nigel Rudd as Meggitt's chairman in December revived rumours that the aerospace engineer would be sold, with United Technologies long rumoured to be among the potential buyers. United has $10bn in cash trapped offshore, against Meggitt's $6.5bn market value.

But Meggitt looks too expensive to buy, UBS argued. Even using United's minimum deal criteria for strategic assets, a takeover would still be value destructive for the US group after three years, UBS calculated.

Competition concerns may also hinder any bid, given a United-Meggitt combination would have a near monopoly in aerospace fire protection and control up to half the market for wheels and brakes, UBS said.

Meggitt slipped 3.1 per cent to 546.5p after UBS downgraded to "sell". The broker also turned more cautious on BAE Systems, which was marked down 3.1 per cent to 516p, including the loss of rights to a 12.3p dividend.

"We are increasingly concerned about the outlook for the UK defence budget," said UBS. "In their manifestos, neither major party committed to 2 per cent of GDP defence spend, while the Strategic Defence and Security Review expected later in the year is unlikely to be positive as we expect it to be budget driven rather than threat driven."

The FTSE 100 retreated from a record high, losing 0.5 per cent or 36.33 points to 7,060.45.

Pearson, the world's largest education company and publisher of the Financial Times, lost 4 per cent to £13.70. According to reports, the Los Angeles schools department is seeking a refund from Apple and has investigated legal action after running into problems with its programme to give students iPads providing access to a curriculum developed by Pearson.

Telecom Plus, the multi-utility supplier, fell 19.7 per cent to 785p after warning that its new finance director had written off £11.3m of unbilled debt over the previous seven years. The charge, which analysts expected to cut group earnings by about £6m annually, was to cover a greater amount of gas lost in the system to leaks and theft than previously assumed.

Premier Oil faded 1.8 per cent to 175p, having been lifted earlier in the week by speculation of possible bid interest from national oil companies.

Petra Diamonds slipped 10.5 per cent to 165p after its quarterly sales disappointed, due in part to fewer high quality and smaller stones from its Cullinan mine in South Africa. Cutting price guidance for the second time in three months, Petra warned its full-year results would miss market expectations.

Debenhams jumped 6.7 per cent to 84.9p, a 16-month high, after its interim earnings beat expectations. The boost was largely because Debenhams pulled forward its spring sale by one week to coincide with February payday.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation