MARKET REPORT: GKN is seeking a new component as bid rumours heat up

GKN has been the topic of conversation in City watering holes for weeks with rumours persisting that the former Guest Keen Nettlefolds automotive and aerospace components group is about to spend big in the US.



Speculation intensified on Wednesday with dealers hearing it is on the verge of launching a $5billion cash and shares bid, worth around $35 a share, for Spirit AeroSystems, the Wichita, Kansas-based aerostructures manufacturer, which was spun out of Boeing. Spirit traded around $24 in New York early on Wednesday .



Bank of America/Merrill Lynch is said to be advising GKN on the deal and has raised funds to enable chief executive Nigel Stein to take GKN to another level. With its share price 1.8p dearer at 341.1p and trading within spitting distance of its 52 week high, dealers said it gives GKN’s financial advisers plenty of elbow room to complete a deal. GKN’s net debt at the end of March was £940million.



Spirit AeroSystems left itself vulnerable to a bid after landing the market with a shocking profits warning towards the end of last year. Its stock nosedived 34 per cent after management warned of sizeable cost over runs on parts it supplies to major aircraft makers.



Elsewhere, news Europe is finally showing signs of growth with PMI readings for July revealing the manufacturing sector rose above the crucial 50 level for the first time in two years, boosted equities.



So did a raft of bullish results from blue chip companies.



The Footsie rose 22.99 points to 6,620.43 and could climb again if late rumours today’s second-quarter GDP data may come in better than expected prove correct. Economists already expect a 0.6 per cent increase in GDP, double the rate of growth in the first quarter, but gossip after-hours suggested the gain on the quarter could stretch to a full one per cent.



Wall Street traded 50 points lower in the early stages with news new US home sales had jumped 8.3 per cent in June to a seasonally adjusted annual rate of 497,000 units, the highest level since May 2008, failing to please.



EasyJet soared 49p after raising its profits forecast for the full year before closing down 2p at 1385p. Most had pencilled in pre-tax profits of about £433million, but chief executive Carolyn McCall said it now expects the figure to be between £450million and £480million.



Buying on the back of a UBS recommendation helped travel group TUI advance 10p to 377.3p. Hopes that today’s interims will please attracted buyers to Wickes DIY group Travis Perkins, 22p higher at 1710p.



International Ferro Metals jumped 1.25p or 13.9 per cent to 10.25p after reporting higher quarterly production. For the quarter ended June 2013, production rose by 15 per cent on a quarter to quarter basis at 39,454 tonnes. The improved performance has come from improved electricity consumption and increased alloy recovery from slag. The company is continuing to negotiate the renewal of its working capital facility with Bank of China which expires on August 21.



Home shopping company Findel, in which Martin Hughes’ Toscafund Asset Management owns 27.7 per cent , rose 22p to 193p after Peel Hunt upgraded to buy from hold following an upbeat trading statement. Analyst John Stevenson raied his target price to 250p from 150p after the company reported that strong sales growth had continued at Express Gifts and Education sales were up 9pc.



A slightly better-than-expected trading update from specialist financial services group Close Brothers left the close 11p better at 1072p. Performance in its securities division, led by top market-maker Winterflood Securities, improved slightly over the first-half, encouraging broker Shore Capital to increase its full-year pre-tax profits forecast by 2 per cent to £161.6million.



Online gaming software supplier Playtech gained 27.5p to an all-time high of 709.5p. Buyers have continued to nibble after a successful analyst and investor roadshow.



APR Energy closed up 7p at 1022p following a routine trading update. There was relief in some quarters that management did not guide down earnings expectations for the full year. However, Westhouse Securities remains a seller ahead of interims on August 28. The broker says the risks remain on the downside.



Punters chased San Leon Energy 0.37p higher to 6.45p amid speculation about an imminent announcement regarding its gas interests in Poland.



Enegi Oil gushed 0.62p to 8p after announcing a placing of 24.9million shares at an average price of 8.11p a pop, raising £2million. The company has entered into a definitive Farm-In Agreement with Black Spruce Exploration in relation to its Newfoundland assets.



Greenko, the Indian developer, owner and operator of clean energy projects, added 3.25p at 117.5p on good annual results. Broker Arden has a target price of 226p.