The FTSE 100 traded higher on Tuesday as global merger and acquisition activity provided investors with another reason to be positive, with the market looking forward to a US interest rate cut next week.
Anglo American led the FTSE 100 0.3% higher as the mining group announced a merger with Teck Resources to create a copper-focused mining giant.
The tie-up followed a string of US deals that underscored the wider optimism in markets created by hopes of lower interest rates.
“A spate of deal-making fired up equities, with many of the main market indices advancing in Europe and Asia. Futures prices also imply a decent start to Wall Street when US markets open later,” says Russ Mould, investment director at AJ Bell.
“Anglo American unveiled a deal to gobble up rival copper miner Teck. On a smaller scale, Novartis said it would buy US clinical biotech firm Tourmaline Bio for $1.4 billion. Yesterday, US lender PNC Financial moved on FirstBank in a $4.1 billion deal, and quantum computing firm Infleqtion announced plans to float in the US via a SPAC, valuing it at $1.8 billion.”
Anglo American shares soared 9% on news of a merger with Teck Resources that would create the world’s 5th largest copper miner.
“It’s interesting to see two companies who have been bid targets find refuge in each others’ arms, snubbing their suitors and going their own way,” said Chris Beauchamp, Chief Market Analyst at IG.
“It looks like the two boards decided they could preserve their own identity by merging rather than letting themselves be absorbed by bigger rivals. As miners grapple with rising costs and uncertain demand, it’s perhaps not surprising that these two have sought to bolster economies of scale. It will also set off a further wave of M&A activity, as the rebuffed suitors look elsewhere for their own expansion.”
In a boost to London’s market, ‘Anglo Teck’ will keep its London Stock Exchange listing alongside listings in South Africa and the US. Should Anglo American have been taken over as opposed to striking today’s merger deal, it would be yet another loss of a major multinational from London’s flagship index.
The mining sector rallied on the news of the Anglo Teck deal, with Glencore jumping 4% and Antofagasta rising 2% as investors questioned whether the deal would spark a wave of M&A.
Phoenix Group recovered some of the losses sustained yesterday after it announced a rebrand to Standard Life amid mixed results.
Profit taking hit the defence sector with BAE Systems, Babcock and Rolls-Royce among the FTSE 100’s top fallers.