The M&C20 was held back by bid activity this week, underperforming the wider market, growing 0.3% to 1,225 points while the AllShare Index was 1% higher, rising 10 points to 1,028, says Will Brumby of Langton Capital.
JD Wetherspoon saw its shares down 4.1% this week on the back of a poorly received trading Q1 trading update which saw FY 15 margins guided down. Margins have long been a sticky point for the city regarding JDW, with some in the market disappointed that the strong like-for-like sales growth is not fully reflected in company profits. We’d argue that the company is broadly doing the right thing in keeping its margins down as this allows the company to gain market share thus raising barriers to entry for other high street pub operators.
Spirit saw its shares rise 3.5% this week while Greene King was down 1.2% as Greene King confirmed the bid for its rival operator. Following this confirmation, Spirit shares are now, as expected, at a small discount to the bid value which is currently 112.5p per share. C&C have until the 30th November to arrange a counter bid, however the shares being currently at a discount to the Greene King bid suggests that the market does not believe that a bidding war is likely. If no counterbid takes place, and nothing derails the Greene King offer, the Spirit share price will be linked to that of the Greene King as the deal’s value is dependent on the value of Greene King’s shares.
Bid news also impacted Prezzo’s shares, which fell 3.5% to 124p over this week. The bid from Papa Bidco, the newly incorporated company jointly owned by TPG Capital and Prezzo, looks likely to be recommended by Prezzo’s board, however the 126.5p per share offered will likely have disappointed some shareholders.
Next week will see Punch update on its preliminary full year numbers on Wednesday. The company’s shares have rebounded in recent weeks having fallen significantly post their restructuring in early October; however they still remain below their pre-restructuring value. The Restaurant Group will be updating the market on its Q3 trading on Thursday.
Analysis provided by Will Brumby of Langton Capital
