TODAY’S FAYRE – Tuesday, 25th November 2014


“Down, wanton, down! Have you no shame

That at the whisper of Love’s name,

Or Beauty’s, presto! up you raise

Your angry head and stand at gaze?

 Poor bombard-captain, sworn to reach

The ravelin and effect a breach–

Indifferent what you storm or why,

So be that in the breach you die!


 Love may be blind, but Love at least

Knows what is man and what mere beast;

Or Beauty wayward, but requires

More delicacy from her squires.

 Tell me, my witless, whose one boast

Could be your staunchness at the post,

When were you made a man of parts

To think fine and profess the arts?

 Will many-gifted Beauty come

Bowing to your bald rule of thumb,

Or Love swear loyalty to your crown?

Be gone, have done! Down, wanton, down!” 


Robert Graves – playwright & poet – 1895-1985-1616


If you have a spare hour and have not been already been, go and see Rembrandt’s Late Works Exhibition at the National Gallery in Trafalgar Square – Exquisite! Mind-blowingly memorable! Rarely have I seen such use of colour and light, with paint appearing to have been ladled on with a trowel. The paintings and drawings on view courtesy of global owners or galleries were created between 1655 and shortly before his death in 1669 at the age of 63. It’s hard to believe that such a genius could have lost his common-law-wife, his son Titus and been declared bankrupt, drowning in debt, all in such a short space of time. These tragedies resulted in all Rembrandt’s works of arts being sold off for a pittance to pay off his debts.



Markets still have plenty of zing about them, despite geopolitical and economic concerns. There is the Thanksgiving holiday to look forward to on Thursday followed by Black Friday’s frenetic activity in the shopping malls as well as on line. Though ‘Singles Day’ in China is now a more significant event in terms of money spent, Black Friday remains a massive barometer for the US economy.


OPEC and particularly Saudi Arabia will be in no hurry to announce any cuts in production at this Thursday’s meeting in Vienna.  It may be important for Saudi Arabia, whilst its reserves are overflowing, to put pressure on Iran, Iraq and Libya to keep the floodgates.  Also it will not have escaped OPEC’s notice that the cost of fracking and shale oil and gas, is relatively expensive. With the US now rampant in that arena, it might also suit Saudi Arabia to make the US feel uncomfortable pro-tem. It has also become very clear that capital investment in exploration and production has dried up.  Oil and gas companies are very highly geared with gargantuan borrowings. Panmure’s excellent Colin Smith forecasts Brent to average US$ 92.5 bbl for 2015 and US$ 95 bbl thereafter.


As well as having a bystander’s interest in Thanksgiving and its effect on retail, here in Old Blighty we have been galvanised by the recent flurry of M&A gossip that manifested itself over the weekend and yesterday. When one considers that the Shanghai Composite has added 18% so far this year and the FTSE 100 has only just about wiped its face despite some volatile market conditions, a slew of IPOS and an improving UK economy, it is not surprising that investors are somewhat bemused at the parsimonious returns. Even Russia is up 2% if you conveniently forget that the Rouble has dropped 28% since the start of the year.  


The leaked rumour that Aviva was prepared to pay £5.6 billion for Friends Life became a reality on Monday morning. Aviva are potentially offering 0.74 shares for every Friends share. This bid represents a 15% premium for Friends shares. At the close of business Aviva’s shares had fallen 5.4%, as Friends had risen by 6%. This deal came as rather a surprise – right out of left field considering that Aviva had expressed interest to expand internationally rather than consolidate in the UK. Perhaps Chancellor Osborne’s legislation, making buying annuities optional triggered the idea of further amalgamation of complimentary operations.   There are of course balance sheet synergies, and make no mistake there will be redundancies and cost cutting exercises. There could be cost savings of £186 million in 2015 and £255 million in 2016. Aviva have 2000 staff in York and 1500 in Sheffield. Friends staff is spread across the country. Our expert insurance research guru Barrie Cornes expressed his surprise at this proposed parochial acquisition and awaits with interest to shareholders’ reaction in the days to come.


There is so much froth over BT’s plans to either accept Telefonica’s offer to sell 02 to them or buy EE, where the market understands BT are also in early negotiations.


As they say what comes round, sometimes goes round. In 2002, just prior to CEO Sir Peter Bonfield leaving, post paying the Treasury on behalf of BT Cellnet £4.003 billion for a 3G licence, BT Cellnet demerged from BT and was re-launched on 18 June 2002 (2002-06-18) as O2. The problem at the time was that BT had a huge debt and a hole in its pension scheme, which required remedial action – hence the demerger. Then in 2005 O2 was acquired by Telefonica for £17.7 billion. Bonfield had a roller coaster ride as CEO of BT. He arrived when shares were £4 each. They hit £15 in 2000 and fell like a stone to £5 after the TMT debacle. Ben Verwaayen was CEO of BT from 2003-2008. He must have shuddered when the O2 deal with Telefonica was consummated.


If BT buys O2 the deal is said to be worth £9 billion and deal with EE (Orange & T-Mobile) slightly more. EE has 33% of the UK mobile market, O2 26.6% and Vodafone 26%. There is no doubt that the way forward is to offer all things to all men – media, TV, entertainment, broadband, fixed lines. It is now a question as to whether a deal can be pieced together and agreed with shareholders, whilst at the same time not incurring the wrath and indignation of the Competition regulators.


Following an earlier announcement that it was in discussions with Platou, Clarkson PLC (‘Clarksons’) today announces its proposed acquisition of the entire issued share capital of RS Platou ASA (‘Platou’) for a total consideration of £281.2m. Of the proposed consideration to be received by Platou shareholders, 75% would be satisfied in Consideration shares, 16.66% in Loan Notes and 8.34% in cash. The Board of Clarksons believes that the acquisition would be earnings enhancing in the 2015 financial year.



This morning Kingfisher posted slightly neutral numbers. De La Rue’s efforts were dreadful but October’s profit warning was already priced in – shares down 0.9%. The banks continue to attract adverse publicity – RBS over misleading the TSC about small loan facilities and news that HSBC will receive a visit from US regulators over FX fixing allegations. Can we have an end to this please?


US companies posting results and trading statements this week – Tuesday – HORMEL FOODS, FRED’S, CAMPBELL SOUP, Wednesday – ASTRO-MED





David Buik

Market Commentator


+44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom


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