UK Credit

FTSE 100 Live January 17: Unilever’s bid for GlaxoSmithKline’s consumer offer, resignation of the chairman of Credit Suisse, Chinese GDP, Chinese interest rates

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Marmite maker Unilever’s hares are down sharply after making a bold move for GlaxoSmithKline’s consumer healthcare arm.

The food giant told investors that the Glaxo unit is a “strong strategic fit” as part of its pursuit of retail categories with higher sustainable growth rates.

Live updates

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Goldman buys a green office in London

Goldman Sachs is backing a new half-billion-pound development in London ‘Paris-proof’ as investors bet demand for eco-friendly office space will rise in the post-pandemic era.

The US investment bank‘s asset management business has acquired a 75% stake in a new ‘green office’ development near London Bridge. The project is led by eco-friendly developer EDGE and is expected to cost around £500m.

The new building is expected to open in 2025 and will be on St Thomas Street. It will be built on a site currently occupied by a Home Office building, which is due to be demolished in July.

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Will Unilever sweeten the deal?

Glaxo’s forecast for organic sales growth of between 4% and 6% means it believes its consumer healthcare business is worth far more than the £50bn Unilever is currently willing to offer.

However, Laura Hoy, equity analyst at Hargreaves Lansdown, believes Unilever’s increased focus on growth in the health, beauty and hygiene segments makes a different approach highly possible.

She added: “The group says it will rush acquisition opportunities in the space, and they don’t get much more attractive than this one.

“With Unilever’s tea business set to fetch over £4bn when sold later this year, management may have the firepower to sweeten the deal.

“Glaxo’s healthcare business comes with heavy debt, however, which could limit the price Unilever – or any other suitor – is willing to pay.”

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Brent at $86 a barrel

Oil prices continue to rise after Brent crude futures rose above $86 a barrel today, near the three-year high of $86.72 seen in October.

Brent is up nearly 25% since early December and around 10% so far in 2022.

Victoria Scholar, Head of Investments at Interactive Investor, said: “Robust outlook for global demand as Omicron’s impact appears to be lower than initially feared, combined with limited supply from OPEC +, support the uptrend.”

She said analysts are pricing in further gains, with JPMorgan eyeing $150 a barrel in 2023.

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Unilever shares fall after Glaxo approach

Unilever shares are down sharply following its £50bn approach to buy GlaxoSmithKline’s consumer healthcare unit.

Marmite and Dove soap business is 5% or 188.5p lower at 3,748p amid fears it could end up having to pay up to £60billion, a price that would also boost the equity element of any proposal of the current £8.3 billion.

Shares of GlaxoSmithKline rose 5% or 86.4p to 1,727.4p as it used the Unilever approach as an opportunity to highlight expectations of 4-6% growth in the personal care branch. medium-term consumer health.

He said Unilever’s price “fundamentally undervalued” the company ahead of plans for its spin-off later this year.

The return of mergers and acquisitions activity boosted the FTSE 100 index, which added 36.68 points to 7579.63.

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Former Lloyds boss leaves Credit Suisse

The resignation of former Lloyds boss António Horta-Osório as chairman of Credit Suisse follows his reported breaches of Swiss and UK quarantine rules.

He said: “I regret that a number of my personal actions have caused difficulties for the bank and compromised my ability to represent the bank internally and externally.

“So I believe my resignation is in the interest of the bank and its stakeholders at this crucial time.”

He is replaced as chairman by current board member Axel Lehmann.

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Taylor Wimpey plotting takeover

Taylor Wimpey told investors to expect a stock buyback in the coming months after what CEO Pete Redfern called a “great” 2021.

In a business update, the homebuilder said it “remains committed” to returning excess cash to shareholders and will announce a payout alongside annual results in March.

“The board currently intends to return this money through a share buyback, but the final method of return will be determined at the time of the full year results in light of the current circumstances” , the company said.

Taylor Wimpey had £837m on its balance sheet at the end of the year, up from £719m a year earlier.

The payment plans come after a solid year for sales and completions. Home completions jumped 47% to 14,087 as pandemic-related disruptions eased. The business sold an average of 0.91 homes per outlet per week, up from 0.76 in 2020, and the average selling price rose 3% to £332,000. The company’s order book stood at £2.55 billion at the end of the year.

Taylor Wimpey said rising house prices “fully offset construction cost inflation amid broader industry pressure on the cost and availability of certain materials.”

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Chinese rate cut boosts Asian markets

The health of the Chinese economy is now a major concern for investors, after the release of GDP and retail sales figures were accompanied by a reduction in borrowing costs.

The first cut in the medium-term loan rate since April 2020 came amid a slowdown in the GDP rate in the fourth quarter to 4%.

The result was above expectations of 3.6% but lower than the previous quarter’s 4.9% after a period of uncertainty caused by Covid-19, supply chain disruption and issues around debt-ridden Evergrande , and the real estate sector in the broad sense. Regulatory crackdowns by Chinese authorities have added to the pressure.

The fourth-quarter performance means China’s economy grew 8.1% in 2021, the fastest growth in a decade after growing just 2.2% in 2020.

China also recorded retail sales growth of 1.7% in December, the lowest figure since August 2020 and down from the 3.9% seen the previous month and below expectations of 3.7%. .

Asian markets were in positive territory after cutting borrowing costs, while oil prices rallied with Brent above $86 a barrel.

CMC Markets expects the FTSE 100 index to open 20 points higher at 7563.

Wall Street markets are closed for Martin Luther King Day, with the focus for the rest of the week on US earnings and the latest UK inflation figure.