Opening falls on Wall Street take shine off other markets after weak US economic dataLeading shares fell back below 7000 as worries about the US economy dragged down markets.Technology shares came under pressure, with chip designer Arm down 73p or more than 6% at £11.27. Traders said growth stocks were being sold on both sides of the Atlantic, while a downgrade of Advanced Micro Devices from neutral to sell by UBS helped unsettle the semiconductor sector. A resurgence of Greek woes has caught markets off guard, as the country finds its cash reserves slipping through its fingers. An attempt by the Athens government to recover €1.2trn that it believes was incorrectly handed over has been slapped down by the rest of the eurozone, and while the ceiling on emergency liquidity has been raised, this is perhaps the most temporary of temporary measures. [The Kraft] talks likely imply a previously mooted £75bn bid for SABMiller being off the table, in the near-term at least, from competitor Anheuser-Busch InBev and partner 3G (which controls a 21% Budweiser stake since the 2008 Belgian-US merger), flattening some of the sector M&A fizz which had been bubbling for a while even if SAB’s prospects remain strong thanks to an enviable emerging markets growth story.There has been some market discussion about the likelihood of 3G teaming with ABI to bid for SABMiller. We have discounted this, since ABI has sufficient resources to bid alone, should it wish to do so - and the mooted combination of Kraft and Heinz by 3G appears far more logical from the 3G perspective. Indeed, any involvement of 3G with ABI would have been a complicating factor. We therefore reiterate our view that a bid for SABMiller by ABI remains feasible, and that this appears more likely this year than in future years.With net debt/EBITDA at 2.3 times (at December 2014) and the need to decide whether to renew the Pepsi bottling contracts in Latin America by the end of 2015, we expect pressure both from external investors and from the company’s own disciplined management to result in decisive balance sheet action being taken.The strategic rational is clear, and this fulfills our prediction for Kofax being acquired by a larger consolidator. Given the significant premium at $11 a share, we recommend this transaction to investors.Lexmark buys Kofax as it doesn’t want to take overseas cash back home, and pay tax on it. Nice move team Kofax. Remember London investors a nice double header here – shares re-rated as they head to the US, and then another as they get acquired. The theme should make investors think about other UK stocks where they have a decent global profile – think about SDL, for example. Continue reading...
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