The proposed takeover of can maker Rexam (REX) by its American rival Ball Corporation leaves several imponderables, which is why Rexam shares are still well below the proposed offer price.
Firstly, Ball has not made an actual firm offer yet. That is in my view a minor issue. Talks have apparently been going on for a couple of months and have made progress. There is no doubt that Ball can afford the £4.3 billion price and the Rexam board is apparently not averse to recommending acceptance of a 40% premium over the share price prevailing before news of the approach leaked out.
Ball has another month under Takeover Code rules to get it all together, which is plenty of time. I have no doubt that an offer worth 610p for each Rexam shares will be forthcoming.
Of greater concern are competition issues. Ball and Rexam have more than 40% if the beverage can market between them and in some regions, including North America and Europe where regulators are more active, well over 50%.
Ball presumably feels that it can get round the regulators’ objections, probably by agreeing to some disposals. However, doubts did put a lid on Rexam’s share price, which added 90p to 538p when the deal was revealed, some 70p below the indicative price.
I never buy shares on takeover hopes but those with a shorter term horizon than mine could take a look. The chances of a quick profit are quite tempting. Existing shareholders should certainly hang on.
I Would Not Touch Tate With A Teaspoon
I would say that sweeteners maker Tate & Lyle (TATE) had left a nasty taste with its latest trading update but that cliché has been used so often over the years that I really should resist. This time last year the shares fell off a cliff and in September the same thing happened. Three times in one year is getting bit much.
Tate shares had risen by £1 in less than two months to reach 664p before it admitted that profits for the current year to the end of March would be “modestly” below the range it had indicated in September. Nearly all the recent gain dissolved in the first hour of trading.
There are several reasons why I would not touch Tate with a teaspoon. It has a record of disappointing trading updates over several years; the shares are still at the same level they fell to in September yet trading has worsened; and there is bad news from North America and Europe so problems are not isolated.
I also do not like companies that put a one line profit warning on the end of a detailed statement instead of being upfront. But then Tate has downgraded expectations so often in the past that perhaps it has difficulty in facing up to the unpleasant truth.
Greeks Without Gifts
To rewrite another cliché, we should fear the Greeks especially when not bearing gifts. One has to admire its politicians, who think that a charm offensive in Germany can involve raising the spectre of the Nazis. That takes some nerve.
The one weapon that the new Greek government has is that allowing a default will be even more painful for the rest of Europe than finding a compromise and I still believe that one of the European Union’s famous fudges will eventually be unveiled.
However, uncertainty will hang over stock markets in Europe, including the UK, until that happens. If no deal is agreed then we can expect a slump in the FTSE 100 index in pretty short order.
A fudge is some way off. The Greek and German finance ministers could not even agree to disagree. I think that they will eventually reach an uneasy short-term pact and when that happens I would expect the footsie to shoots to the record high that has eluded us for so long.
It’s a close call, but I would rather be invested at current levels than be looking to sell.
