Irish drinks company C&C Group shocked the market by attempting to hijack Greene King’s acquisition of Spirit Pub Company last week, but its bold attempt to move into the UK pub business has left shareholders with some concerns.
C&C Group’s share price fell 10% last Friday (24 October), when the quickly rejected bid was announced, and by close on Wednesday the shares were 13.5% down to €3.39 (£2.67) from their closing price last Thursday of €3.92. The potentially transformative tie-up with Spirit has its supporters, but the share price reacted to concerns over how the deal would be funded and possible dilution of existing shares. Concerns were also raised about a potential loss of focus.
The Magners and Tennent’s owner was not helped by weaker than expected first-half results on Wednesday, with pre-tax profit down 2.7% to €69.2m for the six months to August on weakness in England & Wales and the US. Profit was down despite net revenues rising by 9.3% to €368.1m after a strong performance in its core Irish and Scottish markets. The share price fell 8.9% on the day to its lowest point for over two years.
Investec analyst Ian Hunter, who views the Spirit bid as “a potential gamechanger,” said non-core performance was weaker than expected and trimmed his full-year earnings forecasts by 1.9%. However, he argued the core business was continuing to deliver and the stock remained undervalued at its current level.
Elsewhere, the City shrugged off Wednesday’s news that the Serious Fraud Office has opened an investigation into the Tesco profit overstatement fiasco; the supermarket’s share price rose by 2.1% to 173.4p on the day. Market observers suggested the likely length of the SFO investigation meant it was less likely to affect Tesco’s share price than the raft of high-profile short-term factors.
The collapse of the merger between Chiquita and Fyffes hit the Irish company’s share price. By close on Wednesday, Fyffes had lost 10.2% of its value in the days after Chiquita investors voted down the deal, dropping from 81p to 72.8p.
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