The FTSE 100 was muted on Friday after a week of company updates and economic data saw London’s leading index range bound.
The FTSE 100 was trading down 6 points at the time of writing, after spending much of the mornings session in positive territory.
“Despite a good showing on Wall Street last night thanks to better-than-expected US GDP figures, Friday was a damp squib for European stocks, with little change on the main indices,” said Russ Mould, investment director at AJ Bell.
Sainsbury’s
Despite the FTSE 100 bereft of direction on Friday, investors were surprised with the approximate £200m purchase of Sainsbury’s shares by wholesaler Bestway.
Merger and acquisition news has been thin on the ground of late and hints the Uk supermarket were once more catching the attention of potential suitors saw Sainsbury’s shares rise, taking Tesco with them.
Sainsbury’s shares were 4% higher while Tesco gained 0.8%.
“Bestway’s purchase of a stake in Sainsbury’s has come out of the blue. While Bestway says it doesn’t intend to make a bid now, there is logic in putting the two companies together, with echoes of how Tesco thrived from buying Bookers,” said Russ Mould.
“As the UK’s largest independent cash and carry business, Bestway’s strategy is to be seen as a place where retailers, caterers and cafes can obtain all the stock they need at a good price.”
“If Sainsbury’s was part of the same group, both sides could benefit. In theory, Bestway could tap into the supermarket’s buying power and obtain stock at a lower price, thus making its proposition more appealing for its customers. Sainsbury’s could expand its reach and have good access to a broader customer base including foodservice and pet shops, while also being able to compete better against Tesco.”
Morrisons was acquired by US private equity in recent years after a bitter takeover battle and speculation about interest in the UK’s other major supermarkets raises its head periodically.
There is not yet any evidence Bestway’s intention is to attempt a full takeover of Sainsbury’s.
Elsewhere, oil majors BP and Shell were supporting the index as oil prices rose and UK-focused stocks put in a respectable performance.
Housebuilders were stronger, as were the UK banks, ahead of the Bank of England’s rate decision next week. Although the BoE is set to raise rates next week, there is a school of thought the UK’s central bank is nearing the end of their hiking cycle, and could even cut rates this year.
