London’s M&A mini-boom gathered pace this month with the third potential major takeover deal in under a week that could reshape the FTSE 100. Warehouse owner Tritax Big Box unwrapped a £924 million offer for its peer UK Commercial Property. Investors in UK Commercial Property are being offered 0.444 new Tritax shares for every share they hold, equivalent to a 10.8pc premium to share price.
The two real estate investment trusts (REITs) will have a combined property portfolio of £6.3bn and a market capitalisation of £3.9 billion, enough to take the enlarged group onto London’s top-tier stock index.
The recommended all-stock offer will produce the fourth-largest REIT in the country.
It came after two deals this month that were also big enough to have implications for the FTSE 100. The biggest housebuilder in the country, Barratt, offered £2.5 billion for Redrow while DS Smith, the packaging giant, confirmed this month it has been approached over a potential £10 billion offer from fellow London-listed firm Mondi.
The flurry of dealmaking stoked hopes in the financial district of London (known as the ‘City’) that the M&A Market was on the way back, with the potential to alleviate possible City job losses.
London’s FTSE 100 rose after fresh inflation data came in unexpectedly steady offering a glimmer of hope on near-term interest rate cuts after labour market figures had worried some investors.
Governor of the Bank of England (BoE), Andrew Bailey, told parliamentarians that economy was behaving in line with the BoE’s expectations, after the latest inflation figures. Price hikes remained at an annual four per cent in January (unchanged from the previous month) but lower than analysts – and the BoE – expectations, with energy prices expected to contribute to a slight uptick.
Bailey noted that the upward pressures were present, but “there were some more other things going on which were putting more downward pressure on inflation than was expected so that’s good news,” he said.
The downward movement was “pretty broad-based – a bit of it in energy, some in food but also some in services as well, so that’s quite encouraging,” he said.
Services inflation is one of the main gauges of domestically generated inflationary pressures. Although the annual rate of services inflation increased slightly to 6.5 per cent due to base effects, monthly prices fell 0.8 per cent.
In all, Bailey said the figures leave the BoE “broadly where we thought we were going to be.”
Although the Bank left interest rates on hold for a fourth consecutive meeting, policymakers have opened the door to cutting rates later this year if price pressures continue to abate.
The BoE is forecasting that inflation will touch two per cent in the spring before picking up slightly later in the year. However, markets were concerned by figures released on the labour market that showed that wage growth had come in ahead of expectations in the final quarter of last year.
Analysts did flag some potential concerns with the latest inflation data, too.
January’s data can often be impacted by post-Christmas discounts, and this is likely to have played out in household goods. Simon French, head of research at Panmure Gordon, suggested that January is “always the hardest month to draw insight from.”
Looking over the longer term, however, inflationary pressures are dissipating in those categories. Chris Hare, senior economist at HSBC said they are in “clear decline.” Most expect inflation to resume its descent next month at a healthy clip, paving the way for interest rate cuts in the second quarter of the year. (The writer is our foreign correspondent based in the UK)
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