MARKET REPORT: Pendragon sees shares surge after £400m takeover bid

Car dealership Pendragon surged to a five-month high after a takeover approach from its largest shareholder.

The firm, which owns brands such as Evans Halshaw and Stratstone, jumped 19.8 per cent, or 4.5p, to 27.2p after it said it had a 29p per share cash offer from Hedin Mobility Group last Wednesday and was considering the proposal.

The bid is a 26 per cent premium to the closing price on September 20, the day before Hedin made its approach, and values the company at just over £405million. 

Hedin, which operates car showrooms in countries including Belgium, Sweden and Switzerland and owns 27 per cent of Pendragon, has been a key critic of the board, particularly on executive pay.

At its AGM in June, the firm suffered its third consecutive revolt over compensation for its bosses, with more than 65 per cent of votes cast against the pay package.

In August, Pendragon noted that a previous 29p per share offer had been approved by all but one of its five biggest shareholders. 

Brokers at Liberum figured a bidding war was ‘unlikely’ and other shareholders were ‘likely to accept’ the offer.

The FTSE 100 was up 0.03 per cent, or 2.35 points, at 7020.95 while the FTSE 250 dropped 1.39 per cent, or 249.86 points, to 17,722.83.

Housebuilders crumbled amid growing fears soaring interest rates will hit property demand as rocketing mortgage costs put off potential buyers.

Taylor Wimpey tumbled 7.1 per cent, or 7.31p, to 95.84p while Persimmon fell 6.6 per cent, or 89.5p, to 1260.5p, Barratt Developments sank 5.1 per cent, or 20.8p, to 385.2p and Berkeley slumped 4.9 per cent, or 169p, to 3315p. 

Stock Watch –  Music Magpie

Electronics reseller Music Magpie crashed to a record low after a profit warning.

The firm, which allows consumers to buy and sell secondhand electronics, books and CDs, said performance of its consumer tech business has been ‘weaker than anticipated’ amid continuing pressure on profit margins.

Due to the ‘increasing cost of living pressures’ it predicts profits for the year to the end of November will be below previous expectations. It fell 67.6 per cent, or 18.6p, to 8.9p.

 

While a planned cut to stamp duty announced in Chancellor Kwasi Kwarteng’s mini budget last Friday aims to boost demand for housing, many are concerned spiralling inflation and the prospect of a sharp jump in interest payments on mortgages will exacerbate the affordability crisis.

‘Many will be forced to put their dreams of home ownership on hold until the cost of living storm passes,’ said Myron Jobson, analyst at Interactive Investor.

As the pound crashes there are growing fears the sharp drop in the value of sterling will fuel spiralling inflation, forcing the Bank of England to hike interest rates even further.

‘The problem for the new Government is the growth it hopes to engineer through tax cuts is unlikely to come through that quickly while the reduction in the buying power of the pound will effectively import more inflation at a time of already acute inflationary pressures,’ said AJ Bell investment director Russ Mould.

While banking stocks usually rise on predictions of rate increases, NatWest was down 3.6 per cent, or 8.7p, at 233.7p while Lloyds fell 3.3 per cent, or 1.51p, to 44.71p, Barclays slipped 0.6 per cent, or 1.04p, to 160.82p, and HSBC declined 1.7 per cent, or 8.4p, to 501.6p.

As Brent crude traded below $84 a barrel shares in Shell fell 0.1 per cent, or 3p, to 2211.5p while BP dipped 0.7 per cent, or 3.15p, to 429.95p.

FTSE 250 real estate group LXi REIT has pulled out of a £500million deal to buy several supermarkets from Sainsbury’s.

The scrapping of the planned acquisition, announced last week, came amid speculation investors were not prepared to stump up enough cash given market volatility. 

LXi dropped 0.8 per cent, or 1p, to 126.6p while Sainsbury’s slipped 0.8 per cent, or 1.5p, to 191.45p.

One gainer was defence giant BAE Systems, which rose 2.2 per cent, or 17.4p, to 813.2p after broker Jefferies hiked its target price to 1000p from 960p. 

And consultancy firm RPS rose 15 per cent, or 31p, to 238p after agreeing a £636million takeover deal with US group Tetra Tech.