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Burberry shares on rise amid merger speculation

Published 21/10/2016

The FTSE 100 Index remained above the psychologically important 7,000 mark, closing down 6.43 points to 7,020.47
The FTSE 100 Index remained above the psychologically important 7,000 mark, closing down 6.43 points to 7,020.47

Shares in fashion house Burberry soared on the London market amid mounting speculation over a merger with a US rival.

Burberry closed up more than 3%, or 45p, to 1,495p after financial blog Betaville said US luxury bag maker Coach was working with investment bank Evercore to thrash out a deal for the firm.

However, the FTSE 100 Index struggled to make headway but remained above the psychologically important 7,000 mark, closing down 6.43 points to 7,020.47.

London's top flight had been buoyed by tobacco stocks early in the session after British American Tobacco (BAT) announced a 47 billion US dollars (£38.3 billion) merger with US tobacco firm Reynolds .

The deal would create the world's largest listed tobacco company and bring together brands such as Dunhill, Lucky Strike, Rothmans, Kool and Kent with Doral, Misty and Capri slims.

BAT currently owns 42.2% of Reynolds and the proposal involves the acquisition of the remaining 57.8% of the company.

The FTSE 100 firm rose 2.3% on Friday morning before finishing the session as the biggest faller after investors soured to the deal.

Shares in BAT closed down 137p to 4,666p while Imperial Brands closed up 103.5p to 3,965.5p.

Across Europe, Germany's Dax was marginally higher and the Cac 40 in France fell 0.1%.

Brent crude was up 0.4% to 51.59 US dollars (£42.21) a barrel as oil prices were supported by Russia's commitment to help Opec curb output.

On the currency markets, the pound was down 0.3% against the US dollar at 1.221 dollars after French president Francois Hollande said negotiations would be difficult for Prime Minister Theresa May if she opts for a "hard Brexit" by leaving the European single market.

Sterling was also under pressure after the Government surprised economists by racking up higher-than-expected borrowing figures for September.

The Office for National Statistics (ONS) said public-sector net borrowing, excluding state-owned banks, jumped 14.5% to £10.6 billion last month, compared with September 2015.

However, the pound was up 0.3% against the euro at 1.124 euro.

In UK stocks, Holiday Inn-owner Intercontinental Hotels Group (IHG) saw its shares slump after a slowdown in European and American bookings knocked revenue growth.

The company said revenue per available room, which is the sector's preferred measure, grew 1.3% in the third quarter, compared to 2.5% over the previous quarter.

A number of IHG's American hotels are concentrated in oil-producing markets, which have been impacted by the slide in oil prices.

Revenue per available room fell 7.3% in those markets, compared to 2.5% growth in the rest of the region.

Hargreaves Lansdown equity analyst Nicholas Hyett said: ''There's nothing inherently ugly in today's results, they're just a little disappointing."

Shares in IHG were down more than 2%, or 65p, to 3,160p.

The biggest risers on the FTSE 100 Index were Burberry Group up 45p to 1,495p, Mediclinic International up 26p to 919p, Anglo American up 30p to 1,094p and Imperial Brands up 103.5p to 3,965.5p.

The biggest fallers on the FTSE 100 Index were British American Tobacco down 137p to 4,666p, HIKMA Pharmaceuticals down 55p to 1,907p, Intercontinental Hotels Group down 65p to 3,160p and easyJet down 16p to 918.5p.

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