FTSE In-depth: Garfunkels swallowed

By GEOFF FOSTER FOR MAILONLINE
Updated:

 

Geoff Foster

On the table: Garfunkels may be bought by a cash-rich private equity group

Mouthwatering takeover bids and deals have helped dealers survive the dog days of August.

The total value of global mergers and acquisitions has soared to a staggering £129bn so far this month and according to the boys in dark glasses, there is plenty more to come.

Shares of The Restaurant Group, the Frankie & Benny's-to-Garfunkels London-based chain, rose 4p to 247.7p on a late jackanory that it could soon be swallowed by a cash-rich private equity player.

Talk of a £746m, or 375p a share, bid approach did the rounds. Dealers also heard that any interested private equity buyer could face fierce opposition in the shape of TRG's current management, led by chief executive Andrew Page and chairman Alan Jackson, who are also interested in launch¬ing a management buy-out of the business that was founded in 1987 as City Centre Restaurants.

TRG stands apart from its major competitors with a strong balance sheet, a progres¬sive dividend policy and significant growth story, funded by internal cash flow.

Its management, which earlier this year delivered strong underlying growth, despite severely adverse weather conditions and unprecedented levels of disruption to air travel, plans to open 15-25 new sites during 2010.

Italian restaurant and deli chain Carluccio's closed as flat as a plain omelette at 104p. Entrepreneur Richard Caring, who owns swanky eateries The Ivy and Scotts of Mayfair, still sits on 12pc of the equity.

Dealers say he could launch a full-scale cash offer in the region of 130p a share any time.

Elsewhere, it was a bears' picnic as share prices on both sides of the pond fell sharply after Asian markets had moved in a similar direction overnight. Japan's Nikkei dipped below 9,000 for the first time in 15 months on growing concern about faltering economic recovery.

Wall Street collapsed 135 points initially after dealers heard that sales of existing homes in the US had plunged 27.2% in July to their lowest level in more than 10 years. The main reason for the fall being the end of tax credits designed to boost sales.

The Footsie soon registered a 125 point fall before closing 78.89 points lower at 5,155.95. It now stands 12% below its year's high on April 16th. Associated British Foods moved against the trend, closing up 35p at 1050.9p. Broker Jefferies reiterated its bullish stance and target price of 1140p. It believes the stock offers excellent value. Analysts completely ruled out the chances of AB Foods floating its highly successful Primark discount clothes business on the LSE.

Catering giant Compass rose 9p to 513.5p following bullish noises from Investec. The broker's target price is 635p as it believes the group is very well managed and has very good growth prospects over the medium term.

After Irish building materials group CRH warned earnings will fall due to a faltering US economic recovery, investors pulled the plug on Wolseley, 67p lower at 1240p. The plumbing giant derives more than 40pc of group sales in the US. Wolseley also announced the £43m sale of Brandon Hire, its tool hire business, to pri¬vate equity concern Rutland Partners. It bought the business for £72m in March 2006 but it is now no longer a core business activity.

Rio Tinto dropped 141.5p to 3162p follow¬ing reports in the Canadian Press that it is to join forces with a Chinese partner and launch a counter-bid for Potash Corporation, cur¬rently under corporate attack from BHP Billiton.

Interserve eased 0.25p to 196.25p, seem¬ingly unimpressed by its appointment as one of six principal NHS supply chain partners for the new ProCure21 plus contract.

News of an £8.5m rescue deal masterminded by new management team Ian Smith and Tony Weaver left IT firm Redstone 0.95p down at 0.925p. The company, which supplies managed IT services to City banks, is raising almost £7m in a placing and subscription of shares at 0.5p a share.

Smith and Weaver, who become executive chairman and chief executive respectively, are investing a combined £1m in the business via their investment vehicle MXC Capital.

Buyers piled into Leed Petroleum, 0.49p up at 2.97p. The Gulf of Mexico focused oil and gas explorer said its oil reserves will likely be boosted by a sidetrack well which will enable further development of the Main Pass oil field.

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