MARKET REPORT: Mitie soars after agreeing £3.5bn deal with Interserve to form UK’s biggest support services group
Investors piled into Mitie after it unveiled plans to form the UK’s biggest support services group through a deal with Interserve.
Mitie has agreed to pay £271million to take over its rival’s facilities management arm, creating a mega-business with almost 88,000 staff and turnover of £3.5billion.
Combining resources would save the firms millions of pounds a year and help them scale up their operations as the Government battles the coronavirus crisis.
Mitie has agreed to pay £271m to take over interserve’s facilities management arm, creating a mega-business with almost 88,000 staff and turnover of £3.5bn
Mitie and Interserve are both involved in the response, including work with the NHS Nightingale Hospitals.
Their support services divisions – which manage everything from cleaning and security to operating Ministry of Defence training estates – would also complement one another, as Mitie tends to get most of its cash from private sector contracts and Interserve from the public sector.
As well as receiving cash, Interserve’s hedge fund owners would own 23.4 per cent share of Mitie.
The deal comes after Interserve crashed into administration last year and has been hiving off its divisions.
Stock Watch – Eden Research
Eden Research rallied after it clinched two important patents in the US.
The company produces pesticides and biodegradable versions – made from yeast extract – of tiny microplastic balls that release chemicals.
One of the patents is related to its microcapsules and the other is for technology that will be used in its new insecticide products for killing mites and preventing mite infestations. Shares in AIM-listed Eden Research rose 7.8 per cent, or 0.6p, to 8.28p.
Mitie revealed the takeover alongside annual results that showed revenue rose 4 per cent to £2.2billion.
In April and May, turnover was down 12 per cent and profit by 20 per cent – a less dramatic drop than many had feared.
Mitie will pay for the deal in part by raising £201million through selling new shares, and will also bolster its balance sheet by scrapping its final dividend.
The small-cap contractor stressed that the deal needs approval from shareholders and could still fall apart.
But traders were undeterred, sending Mitie’s shares up 18.3 per cent, or 14.6p, to 94.6p.
Over on the FTSE 250, rival Capita fell out of favour after warning it expects to take a 10 per cent revenue hit in the first half. About half of this was a result of the pandemic, while the other half was from contract losses and had been expected.
Shares in the business, which recently rallied on news it wants to sell a £500million education software business, fell 6.7 per cent, or 3.12p, to 43.43p.
The rest of the FTSE 250 was also in the red, slipping 0.2 per cent, or 38.71 points, to 17,112.12.
The FTSE 100, in contrast, inched marginally higher, rising 0.4 per cent, or 23.45 points, to 6147.14.
Footsie-listed defence giant BAE Systems was up 1.3 per cent, or 6.2p, to 485.8p by the close after it struck an optimistic tone.
The contractor will take a 15 per cent hit to first-half profits but the company, which makes warships and Typhoon fighter jets, said trading will be ‘much stronger’ over the next six months as it gets back to full capacity.
But Rolls-Royce dropped another 1.6 per cent, or 4.8p, to 295.4p despite clinching contracts with the US Navy worth £93million this week.
And online car site Auto Trader also dipped into the red, closing down 0.9 per cent, or 4.8p, to 521p, after it said some retailers were leaving its platform and that revenue would probably fall slightly in July.
Brewer and pub group Marston’s got the go-ahead from 98.7 per cent of shareholders to form a brewing joint venture with the UK arm of Carlsberg.
Marston’s will own 40 per cent while Carlsberg – which will pay Marston’s up to £273million – will own the other 60 per cent.
Investors toasted the deal, sending shares up 1.8 per cent, or 1.2p, to 64.5p, which will give Marston’s more time to concentrate on its pubs.
And Simply Be and Jacamo-owner N Brown managed to climb 2.1 per cent, or 0.8p, to 39.7p despite profit slumping 29 per cent to £59.5million in a restructuring-heavy year.
The online retailer also said it had poached Rachel Izzard from Aer Lingus to be its finance chief. Izzard has headed up the Irish airline’s finance team since 2015.