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FT Opening Quote: Galliford Try in merger talks with Bovis

Summary:
Galliford Try in merger talks with Bovis, HSBC appoints Mark Tucker and PIK Group delists from the LSE. FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here. Builders aren’t allowed to work on Sundays, are they? No-one seems to have told the board of Bovis Homes, which has now clocked on for another Sunday’s worth of responding to press speculation. Press speculation that turns out to be uncannily accurate.Back in January, it was on with the hard hats and high-vis to deal with a Sunday Times story about shareholder Andy Brough of Schroders trying to set up all share merger with Berkeley Homes. Yesterday, it was time to admit that it had received merger proposals from Redrow and Galliford Try, and the latter

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Galliford Try in merger talks with Bovis, HSBC appoints Mark Tucker and PIK Group delists from the LSE. FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.

Builders aren’t allowed to work on Sundays, are they? No-one seems to have told the board of Bovis Homes, which has now clocked on for another Sunday’s worth of responding to press speculation. Press speculation that turns out to be uncannily accurate.

Back in January, it was on with the hard hats and high-vis to deal with a Sunday Times story about shareholder Andy Brough of Schroders trying to set up all share merger with Berkeley Homes. Yesterday, it was time to admit that it had received merger proposals from Redrow and Galliford Try, and the latter was still in with a chance.

Bovis said on Sunday that it had turned down an initial offer from Galliford Try but remained in discussions with the FTSE 250 housebuilding and construction group about a revised deal. A combination of the two groups would create a top-five UK housebuilder with a market value of about £2.5bn and output of more than 6,700 homes a year.

This morning, Galliford Try spelt out the terms of its approach: equity in a combined group would be split 52.25 per cent to Galliford Try shareholders and 47.75 per cent to Bovis shareholders. This would value the entire issued equity of Bovis at £1.2bn or 886p per share, representing a 7 per cent premium to Bovis’s closing share price.

Bovis needs its financial foundations shoring up as it has struggled to meet production targets and suffered an outbreak of customer complaints about unfinished homes. Chief executive, David Ritchie, resigned in January following a profit warning.

But Redrow has not upped hod and given up. This morning, it said it was still keen to reach a deal:

“Redrow continues to believe the potential combination offers a compelling opportunity to create a combined business with the scale and operational strength to compete more effectively in the growing UK housebuilding market… Given that the proposal is largely in the form of Redrow shares, Bovis shareholders would be able to share, alongside existing Redrow shareholders, in the proven value creation skills of the Redrow management team.

This morning, Bovis confirmed the two most recent approaches and said it had “concluded that the Redrow proposal was not in the interests of Bovis shareholders as the cash element of the offer would require shareholders to crystallise value at the current Bovis valuation”.

But it said “Discussions with Galliford Try are ongoing. In the meantime, the Board is making good progress with plans to recover and improve group profitability and enhance return on capital employed. The search for a new Chief Executive is also progressing well.”

HSBC has set the managerial merry go round in motion by appointing Mark Tucker of Asian insurer AIA as its new chairman, replacing Douglas Flint – and it has given him a very clear priority: find a new chief executive to take over from Stuart Gulliver.

Mr Gulliver has told the HSBC board he will quit as chief executive next year, putting the search for his successor at the top of Mr Tucker’s in-tray

Mr Gulliver, 58, has led HSBC since 2011 and has reshaped Europe’s biggest bank by selling assets and shifting resources to Asia, where it makes most of its profits, while tightening lax compliance and controls that had led to big fines.

Mr Tucker, the 59-year-old chairman and chief executive of AIA, was first approached by HSBC around the start of the year, and his appointment breaks with the bank’s tradition of promoting insiders to top jobs. He has been cleared by regulators in the UK is due to start at HSBC in the second half of the year.

AIA said its new chief executive would be Ng Keng Hooi, its regional chief executive, who joined in 2008 after a decade working alongside Mr Tucker at Prudential, the UK-based insurer.

How easy is it to make money from Russian warehouses? Here’s a clue: not very. Raven Russia has taken ages trying to buy just three properties in St Petersburg – and last month the deadline had to be extended, because certain escrow arrangements had not been satisfied. Now it has put out some not entirely satisfactory results, but thinks the trend is looking up. Underlying earnings per share fell to 7.17 cents, from 8.17 cents last year. However, it has swung back to a pre-tax profit of $22m from a loss of $205m last time – mainly because of lower revaluation losses.

Chief executive Glyn Hirsch said:

“Local markets feel like they are bouncing along the bottom and we have backed that belief through seeking acquisition opportunities. We are beginning to feel more confident and look forward to improving macro conditions and hard evidence of improved trading on the ground.”

But PIK Group, Russia’s largest homebuilder, is giving up on the London market. It has said it will delist from the London Stock Exchange and focus on its domestic flotation – becoming the latest Russian company to heed Kremlin advice to head home.

PIK joins gold miners Polyus and Nordgold and potash producer Uralkali in abandoning secondary listings in London over the past 18 months citing low liquidity or market capitalisations below expectations.

Its move also follows Russia’s government’s call for corporates to return home following western sanctions imposed on the country in response to Moscow’s invasion and annexation of Ukraine’s Crimea.

Beyond the Square Mile

Asian markets had a mixed start to the week. Sydney’s S&P/ASX 200 index was off 0.3 per cent, Tokyo’s Topix was up 0.2 per cent and in Hong Kong the Hang Seng index was up 1.3 per cent.

The dollar index, which tracks the currency against a basket of peers, was off 0.1 per cent at 101.2.

The pound was holding above $1.22 as speculation mounts that the UK government is poised to trigger Article 50 of the Lisbon treaty.

Oil prices fell in Asian trading, after last week suffering their sharpest one-day sell-off in 13 months. Brent crude, the international benchmark, fell as much as 1 per cent to $50.85 a barrel. West Texas Intermediate crude briefly dropped below $48 per barrel in Asia, pointing to further pressure on the US oil benchmark. The price fell as much as 1.2 per cent to $47.90 — its lowest since November 30.

Intraday

In the US, the S&P 500 is expected to begin trading in New York down 0.1 per cent.

The House of Commons will vote today on amendments to the Brexit bill made by the House of Lords last week. Rebel Tory MPs admit they are unlikely to have the numbers needed to block the prime minister. If passed, the bill leaves Theresa May free to trigger Article 50, beginning the process of leaving the EU.

Corporate earnings reports out today include Innogy and Helvetia.

The economic calendar for Monday is easing into a busy week (all times London):

09.00: Italy industrial production
11.00: Riksbank deputy governor Kerstin af Jochnick speaks
11.30: Nato secretary general Jens Stoltenberg speaks
12:00: Hungary’s parliament elects new president
13.30: ECB president Mario Draghi speaks

The markets at 07:55

Asian markets
Nikkei 225 up +29.14 (+0.15%) at 19,634
Topix up +3.39 (+0.22%) at 1,577
Hang Seng up +271.95 (+1.15%) at 23,841

US markets
S&P 500 up +7.73 (+0.33%) at 2,373
DJIA up +44.79 (+0.21%) at 20,903
Nasdaq up +22.92 (+0.39%) at 5,862

European markets
Eurofirst 300 down -0.12 (-0.01%) at 1,471
FTSE100 up +28.12 (+0.38%) at 7,343
CAC 40 up +11.81 (+0.24%) at 4,993
Dax down -15.21 (-0.13%) at 11,963

Currencies
€/$ 1.07 (1.07)
$/¥ 114.60 (114.74)
£/$ 1.22 (1.22)
€/£ 0.875 (0.8765)

Commodities ($)
Brent Crude (ICE) down -0.19 at 51.18
Light Crude (Nymex) down -0.28 at 48.21
100 Oz Gold (Comex) up +8.80 at 1,210
Copper (Comex) up +0.02 at 2.61

10-year government bond yields (%)
US 2.58%
UK [Symbol not found: GB10,P:FSI]
Germany 0.49%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.44bps at 18.61bp
Markit iTraxx Europe +0.46bps at 71.82bp
Markit iTraxx Xover -0.61bps at 283.07bp
Markit CDX IG +0.25bps at 64.59bp

Sources: FT, Bloomberg, Markit

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Siona Jenkins
Former Cairene; FT Middle east news editor. Views my own.