UK cigarette maker to buy US brands after Reynolds-Lorillard merger clearedAs leading shares staged a recovery from Monday’s losses, albeit one lacking in much conviction on a so far quiet day, Imperial Tobacco was among the main gainers.US regulators gave approval for Reynolds American to buy smaller rival Lorillard, a move which paves the way for the merged group to sell Imperial around $7bn worth of brands, including Winston, Kool, Salem and Maverick. The sales are a condition of the Federal Trade Commission allowing the deal to go ahead, and could also include the Blu e-cigarette brand.European markets are benefiting from a little bit of dollar relief this morning, with equity markets clawing back some gains after yesterday’s sharp fall. Stronger than expected US economic data raised the prospect of rate hikes this year, which led to a sharp rally in the dollar and a sell-off in global equities. Alongside Greece, Federal Reserve policy remains a key catalyst for markets. In Europe, time is rapidly running out to secure a deal between Greece and its creditors, with few signs of convergence. However, the real fear for Europe is not only that Greece may leave the EU, but that the markets may have to contend with potential contagion elsewhere in Europe. Left-wing party Podemos’s unexpected gains in Spanish local elections at the weekend highlighted the risks that an anti-austerity groundswell may undermine some of the hard gains that have been achieved through the pain of austerity.Six months ago we said that a bottoming in the US rig count should drive Weir shares higher; with that bottom now seemingly imminent, the question is: what’s next? Using the US horizontal rig count has been a useful (but very rough) proxy for pump orders, and although completion of drilled-but- uncompleted wells might support pump volumes before the rig count recovers, we think that even recovery valuations - at 2.2 times enterprise value/sales - now look full; in prior recoveries Weir’s enterprise value/sales peaked around current levels. We downgrade to hold with a modestly raised target price of 2,000p (from1,900p). Continue reading...
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