MARKET REPORT: Rumours of a planned spending spree hits medical equipment firm Smith & Nephew

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Merger talk: JP Morgan Cazenove believes medical equipment firm Smith & Nephew is looking to make a major takeover


Deals are clearly on the agenda for Smith & Nephew, according to JP Morgan Cazenove, which recently had a sit-down with the top brass of the FTSE 100 med-tech giant.

But a £2.3billion dart for US surgical instruments group Nuvasive looks unlikely, the investment bank reckons, addressing reports the two companies had held talks.

However, analyst David Adlington and the team at JPMC think S&N still may be winding up to something quite ambitious on the takeover front.

Merger talk: JP Morgan Cazenove believes medical equipment firm Smith & Nephew is looking to make a major takeover

Merger talk: JP Morgan Cazenove believes medical equipment firm Smith & Nephew is looking to make a major takeover

In a note to clients, they said: ‘Management clearly believe that, historically, the company has been too conservative on mergers and acquisitions and are planning to be more active going forward.’

S&N’s share price – down 3 per cent, or 45.5p, at 1469.5p – looked to be pre-empting a buying spree of some description.

Elsewhere, Royal Dutch Shell is one of the top picks in the oil and gas sector for Barclays Capital.

Barclays pointed out that investors can expect a 6 per cent dividend yield (far better than keeping cash in a bank or building society), while the Anglo-Dutch giant has also pledged to buy back a slug of its own shares. 

Up 0.7 per cent, or 17p, at 2427p, Shell has seen its shares pick up real traction in the run-up to, and the aftermath, of its full-year results. 

Stock Watch – Stride Gaming 

Shares in Stride Gaming were in demand after the owner of Kitty Bingo effectively put itself up for sale.

The price of 111p – after it climbed 7.3 per cent, or 7.5p yesterday – values the business at around £83million. 

Floated in May 2015 at 132p, it raced to more than £3 before hitting reverse gear when it incurred fines for compliance failures.

With around 11 per cent of the £2.8billion-a-year online bingo market, the company should attract attention from the industry’s big wheels.

Both it and BP (up 0.06 per cent, or 0.3p, at 544.3p) benefited from the upturn in the value of a barrel of oil. In all, oil stocks have advanced around 19 per cent in the year to date, Barclays pointed out.

The FTSE 100 began the week on the front foot as it advanced 0.8 per cent, or 57.93 points, to 7129.11 amid optimism that delegations from Washington and Beijing may be able to break the China-US trade impasse when they meet later this week. 

Traders seemed unflustered by a dump of economic data, which showed the UK grew by an anaemic 0.2 per cent in the last quarter of 2018. The construction sector, meanwhile, was at its lowest ebb since 2012.

Topping the blue-chip leaderboard was Tui, up 4.9 per cent, or 44.8p, at 958.2p, with bargain-hunters entering the fray after last week’s profit warning which had wiped around a fifth from the value of the international travel company.

You have to feel for those who bought into Tui in May last year when the stock was changing hands for more than £17.

Ahead of the banks’ reporting season, Morgan Stanley took a look at the sector, revising two of its calls. It has upgraded Lloyds (up 1.5 per cent, or 0.84p, at 57.72p) to ‘overweight’ from ‘equal weight’, while pushing Royal Bank of Scotland (off 0.5 per cent, or 1.3p, at 237.8p) in the opposite direction.

Barratt Developments (up 2 per cent, or 11.2p, at 574.2p) and Bovis Homes (up 0.05 per cent, or 0.5p, at 1028.5p) held up well after Liberum downgraded its calls on the two builders to ‘hold’ from ‘buy’.

The recent sector-wide bounce discounted the prospect of a hard Brexit, the broker said.

Tobacco giant Imperial Brands was up 1.5 per cent, or 39p, at 2576.5p after it announced chairman Mark Williamson was stepping down.

It said his departure was due to the introduction of a UK corporate governance code which says chairmen should serve for a maximum of nine years.

The 61-year-old, who is also an independent director at National Grid, is to stay in post until his replacement is chosen.

There was some pep in the step of investors in Futura Medical as the shares rose a further 16.8 per cent, or 3.12p, to 21.75p. Futura has developed a gel that acts quicker than Viagra and has fewer side-effects than the little blue pills.



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