Today’s Markets: European stocks rally fizzles out after Wall Street enters bear market

Companies

Lloyds’s close to HBOS fraud settlement

Lloyd’s Bank (LLOY) may be finally able to draw a line under one of the most shocking and tawdry incidents of institutionalized banking fraud to emerge from the entire 2008 financial crisis and its ill-fated takeover of HBOS. Victims of the fraud will be offered £3mn each in compensation for their distress and, if all eligible victims accept the offer, then the total cost to Lloyd’s will be £600mn – the bank had previously made a £790mn provision to cover potential costs.

The fraud, which was organized through the Reading branch of HBOS, involved employees in the corporate services division fraudulently placing perfectly viable small businesses into receivership, whilst pocketing the proceeds and milking fees for overseeing supposed distressed debts and spending the proceeds on prostitutes, gold watches and expensive foreign holidays. The compensation offer will settle the outstanding civil part of the claim against Lloyd’s/HBOS, with the criminal proceedings against individual employees already concluded and long prison sentences imposed. JH

Go-Ahead poised for bidding war

Go Ahead (GOG) has agreed a £648mn takeover deal – but a second bidder looks set to enter the fray. The public transport provider has reached an agreement with Melbourne-based bus company Kinetic and infrastructure firm Globalvia Inversiones. But another Australian company is still considering a bid, so the offers could climb from here.

Go-Ahead chief executive Christian Schreyer said the company would remain a “standalone business within a global platform”, while Kinetic co-chief executive Michael Sewards said his company could “accelerate” Go-Ahead’s growth.

Under the terms of the accepted deal, Go-Ahead shareholders will receive 1,500p for each Go-Ahead share. This will consist of 1,450p in cash and a special dividend of 50p per share, in lieu of a final dividend for the year ending 2 July 2022. This represents a premium of 24 per cent to the company’s closing price 10 June – the last business day before the takeover bid was announced. Go-Ahead noted the impact other deals in the sector had had – including the rejected offer for First Group (FGP) at the end of May – as they had pushed up its own share price in anticipation of an offer being made.

Kinetic and Global via may not have the final word, however. Kelsian – a public transport group based in Adelaide that has also approached Go-Ahead – has urged shareholders to do nothing for the time being (although there is nothing for them to do until the scheme document is published). While Kelsian has yet to make a firm offer, it said it could accelerate growth at Go-Ahead “creating substantial value for Kelsian shareholders”.

Go-Ahead’s share price has risen by 37 per cent over the past five days. JS

Entain reveals Dutch acquisition

Sports betting and gaming company Entain (ENT) has entered into an agreement to acquire a key online sports betting and gaming operator in the Netherlands.

The company will pick up the entire share capital of BetCity for an initial fee of £257mn in cash at completion, which is expected to happen in the second half of this year. Further payments will be due as part of the deal, with a “balancing payment” in early 2023 based on BetCity’s 2022 performance and two further contingent payments agreed based on 2023 performance and the completion of synergies and platform migration.

Entain said that the final bill would come in around £386mn. The payment is capped at £729mn.

The company stopped trading in the Netherlands in October 2021 as updated rules from Dutch gaming regulator KSA meant it had to apply for a new licence. Entain’s bwin and Party brands are now expected to get sign-off later this year.

The acquisition of BetCity, which was licensed last October, will help the company take advantage of “the significant opportunities in the newly regulated Dutch market” according to Entain chief executive Jette Nygaard-Andersen. CA

Games Workshop says 2022 profit slightly behind expectations

Sometimes you’re the (War)hammer, sometimes you’re the nail. Such is the case for Games Workshop (GAW), which has continued its weak share price run after a year-end trading update on Tuesday morning. The Warhammer company’s shares were down 3 per cent, taking its one-week decline to 12 per cent.

The trading update, covering the 12 months to 29 May, pointed to a pretax profit increase of 3 per cent on the year before, at “not less than” £155mn. This is not far off the consensus estimate of £157mn. Core revenue and royalties at the fantasy figurine retailer were up 9 per cent and 75 per cent respectively, although tighter margins because of shipping costs and other higher prices meant this was not fully carried through to the bottom line.

In April, we said Games Workshop was more attractive at its current weaker market capitalization – now around half that of the 2021 high point – given its extremely loyal fanbase and strong forecast free cash flow yields. AH

Bunzl goes shopping in Germany and New Zealand

​​Consumables distributor Bunzl (BNZL) is acquiring competitors in Germany and New Zealand in a pair of deals that will add more than £150mn of revenue.

In Germany, it is acquiring an online distributor of cleaning and hygiene products, Hygi.de, which generates €107mn (£92mn) of sales. In New Zealand, it has just completed a deal to buy USL, a distributor of medical consumable products to the healthcare sector. It is set to bring in annual revenue of NZ$114mn (£59mn).

Bunzl did not disclose how much it is paying for the businesses, nor how profitable they are but broker Shore Capital said that it expects the operating margins generated to be higher than the group’s own, which stood at 6.1 per cent last year. It also said the Hygi deal would boost Bunzl’s presence in Germany, a market in which it has been “under-represented”. MF

Bellway shares up following trading update

Shares in housebuilder Bellway (BWY) were up almost 3 per cent this morning following a bullish trading update for the housebuilder. The company reported a 5.9 per cent increase in sales and a 27.5% leap in its order book to £2.4bn over the past five months. It has also appointed a managing director specifically to deal with its £488mn of cladding repair operations. The company will post its year-end results on July 31. ML

Palace Capital CEO steps down amid shareholder pressure

Palace Capitals (PCA) chief executive has stepped down following reports of shareholders demanding change at the real estate investment trust (Reit). Its shares fell 4 per cent this morning. Neil Sinclair, who co-founded Palace Capital with Stanley Davis and Andrew Perloff in 2010, will step down from the top job with immediate effect with chair Steven Owen taking his place. Earlier this month, The Sunday Times reported discontent among some of the big shareholders of the Reit. One told the paper: “There isn’t a convincing strategy and I don’t see how Palace is going to deliver anything other than a very average performance. Something needs to change.”

The news comes as the company posted its full-year results revealing an 11.4 per cent rise in net tangible assets to 390p as net income rose 27.5 per cent to £19mn and pre-tax profit was up 4 per cent to £7.8mn. ML

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