23rd May 2014
AstraZeneca’s rejection of Pfizer’s “final” attempt to secure a merger deal and some words of caution from Royal Mail put the brakes on blue-chips this week.
The FTSE 100 index closed on Friday at 6,815.75, just 4.81 points down on the day and 1% off over the week.
AstraZeneca, was the steepest faller among the top 100, shedding 10% to 4,328p after it confirmed on Monday that it had rejected Pfizer’s “final” bid which saw the US group up its offer to £55 per share valuing the potential deal at £69bn.
After lengthy discussions last weekend, the US firm made its approach but the UK group said the proposal “falls short” of the firm’s value as an independent science-led company and that the deal would bring uncertainty and risks for shareholders.
However following the latest rejection, AstraZeneca’s biggest shareholder, fund manager Blackrock said it wants the British group to resurrect talks with Pfizer.
This week also witnessed Royal Mail shares collapse by 8% to 525.5p as it warned that it faced very tough market competition from rivals such as TNT Post UK, which are not obligated to deliver a universal postal service.
Chief executive Moya Green said: “Royal Mail is required to deliver six days a week, overnight, throughout the whole country, to stringent quality standards and at a uniform, affordable tariff.
“We are also required to deliver any items TNT Post UK does not consider economic to deliver itself. If TNT Post UK is successful in delivering its stated objectives, this could threaten the fundamental economics of the Universal Service.”
The caution came as the group issued its first set of financial results since its privatisation last October, where it announced that annual operating profits jumped 12% to £671m.
Also enduring share price falls over the week were Vodafone, losing 5% to 206.2p while BG Group, also 5% down, finished at 1,213.5p.
HSBC closed the week 3% off at 614.8p, as its boss Stuart Gulliver asserted at the group’s annual shareholder meeting that the business has no intention of restructuring its investment banking division, in the way some of its rivals have. Barclays, up 2% at 246.6p, was hit with a £26m fine by the City watchdog, for its part in fixing the price of gold.
The Financial Conduct Authority said that for almost 10 years – between 2004 and 2013 – the bank had failed to put adequate controls in place to ensure price fixing of the precious metal could not occur.
Lloyds Banking Group, 3% better at 75.96p, next week launches the sale of about a quarter of its TSB business via an IPO with the pricing expected to be below book value, industry sources told Reuters.
Elsewhere in the sector Royal Bank of Scotland edged 4% ahead to close at 334.6p, while Standard Chartered finished the week flat at 1,341p.
Paper and packing group Mondi, buoyed by some recent upbeat notes from analysts at Goodbody and Credit Suisse, was the week’s top riser, jumping 9% to 1,080p.
Equipment rental giant Ashtead Group and Sports Direct International also enjoyed a weeks of gains, with each rising 8% to close respectively at 865.5p and 774p, while stock in engineer GKN increased 6% to 388.3p.
Following the long weekend, next week sees results and market updates arrive from B&Q owner Kingfisher, Severn Trent and Tate & Lyle.