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FTSE 100 makes limp start to the week as Pfizer misses out on AstraZeneca

Published: 03:06 20 May 2014 AEST

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London’s FTSE 100 got off to a slow start to the week after bid speculators took a haircut after AstraZeneca came off the auction block. 

US drugs major Pfizer doesn’t want to fight out a hostile takeover, and today Astra’s board rejected a final proposed bid worth £69bn – or £55.00 per AstraZeneca share, comprising £24.76 in cash and 1.747 Pfizer shares. Astra said the terms undervalue the company and “its attractive prospects”.

AstraZeneca shed 536p, around 11%, to end Monday’s trading at £42.87 per share.

As Pfizer has indicated its proposal is a final one then, under UK takeover law, it cannot increase the offer unless a rival bidder enters the fray. Or, alternatively, it must wait at least six months before making another move its Anglo-Swedish rival.

Leif Johansson, chairman of Astra, had what maybe a final dig at Pfizer, saying Pfizer's approach throughout its pursuit of AstraZeneca “appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation”.

The will-they-won’t-they takeover chatter has been a boost for the London’s blue-chip benchmark, and with the deal now off the table the FTSE 100 ended the day 0.16%, 11 points, lower at 6,844. 

Elsewhere in the City, easyJet (LON:EZJ) and British Airway’s owner International Consolidated Airlines (LON:IAG) topped the FTSE 100 gainers, up 4.7% and 3.5% respectively, thanks to Ryanair’s (LON:RYA) positive annual financial results.

Shares in Ryanair, the archetypal budget airline, soared almost 10% as annual profits of €523mln beat expectations.

The company itself had forecast profits in the range of €500mln to €520mln, whilst analysts had predicted profits in the order of €515mln. Year-on-year, however, profits were down 8%, because of cheaper fares and higher fuel costs.

Perhaps unsurprisingly, to anyone that’s taken a Ryanair flight, the budget airline that once famously proposed to charge customers to ‘spend a penny’ revealed that ancillary revenues are growing much faster than its passenger numbers.

Income from selling things such as extra luggage, car hire, insurance, hotel bookings and in-flight ‘scratch-cards’ now accounts for a quarter of the group’s  revenues.

Meanwhile, Ryanair says a ‘hedge’ on 90% of its anticipated fuel requirements for the current financial year, will save an estimated €70mln. It is also already hedging a portion of its fuel requirements for 2016, as well as hedging for anticipated forex impacts.

It says bookings thus far for the busier summer period are “significantly ahead” of last year. And whilst being cautious about forecasting in a weaker second half of the year, Ryanair said it expects to grow profits to between €580mln and €620mln in the current financial year.

Packaging firm Mondi (LON:MNDI), specialist engineer Johnson Mathey (LON:JMAT) and Primark’s parent Associated British Food (LON:ABF) were also among the climbing blue-chip stocks on Monday.

In the small cap market, copper miner Weatherly International advanced over 10%, as the company said the mine is on-schedule to deliver first copper in the second quarter of 2015.

Whilst reporting that construction work was now 44% complete, the company also informed investors of a more positive economic assessment of the proposed mining operation compared to 2012’s bankable feasibility study.

Elsewhere, audio-visual specialist Mirada (LON:MIRA) got a boost as it landed the company’s largest ever contract - a multi-million dollar deal “with a large established Latin American digital TV operator”.

The name of the customer and terms of the deal weren’t revealed. However the announcement followed the successful trial of the company’s iris tv-anywhere application, which itself was worth US$1.4mln.

“Typically, the set-up fees are no larger than half a million to a million [dollars], so this is very, very big. This is only the set-up fees,” chief executive Jose Luis Vazquez told Proactive Investors.

Northern Bear (LON:NTBR) was up about 30%, and was among the best performing stocks after a trading update. Others included surface coatings firm Hardide (LON:HDD), up 18%, and Mining Investment Resources (LON:MIR), which is up 20%.

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