Market report: Tie-up talk boosts InterContinental

InterContinental Hotels - Newscast/UIG via Getty Images
InterContinental Hotels – Newscast/UIG via Getty Images

Merger whispers lifted shares in InterContinental Hotels, after reports French rival Accor had eyed a tie-up between the two groups.

The FTSE 100 company, which owns the Crowne Plaza brand, edged up 34p to £40.30 following a report in French newspaper Le Figaro.

It said Sébastien Bazin, Accor’s chief executive, had formed a team in June to examine the possibilities of a transaction.

Ultimately, Mr Bazin decided it was not the right time to move ahead, Le Figaro said, but Accor’s board offered support to the project in principle.

A tie-up between the groups – the third and fourth largest Western hotel chains – has been a “regular suggestion”, wrote analysts at Bernstein, who added InterContinental looks to expensive to justify a deal at this point.

Jefferies’ Stefano Bertolini said a merger between the two would create the world’s largest hotel chain, with “leading positions in all geographies”. He said such a move would make sense due to the group’s synergies on cost and geographic exposures.

The rise left InterContinental as one of the few bright spots on a poor day for the FTSE 100, which dropped sharply as fears of a resurgence in European virus cases and rising trade tensions weighed on the Continent’s indices. All but 10 of London’s blue-chips fell, with companies exposed to international industry taking an especially heavy hit. Strong gains for the pound added to the pressure.

Shares in fund manager M&G dropped 11p to 169p after it was downgraded by Deutsche Bank, which warned the group faces looming revenue pressures. In a note to clients, analyst Oliver Steel said the group looked “less engaging” beneath its solid first-half results, warning it will struggle to meet its capital generation targets. He cut the FTSE 100’s rating from “buy” to “hold”.

Copper miner Antofagasta also found itself in Deutsche Bank’s sights, dropping 64p to £10.85 after analyst Liam Fitzpatrick cut the group’s rating from “hold” to “sell”. He said the stock’s price premium relative to peers looks “unjustifiable”, warning the Chile-focused group faces continued strains on its cash flow.

Elsewhere, Sainsbury’s climbed 1.1p to 188.4p, even after BlackRock Investment Management boosted its short position against the company to 2.16pc of the supermarket’s stock.

On the FTSE 250, Mike Ashley’s Frasers Group – the company behind Sports Direct – led risers, climbing 40.8p to 346.6p despite reporting a 20pc annual profit hit that it attributed to the pandemic. Royal Bank of Canada’s Richard Chamberlain said the results looked “mixed”, but noted the group’s “upbeat outlook”. He warned, however, that the group is likely to see increased pressure from online competitors.

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