Market News

What Does Sainsbury’s and Asda £10bn Merger Mean for Shareholders?

Sainsburys and Asda mergerSainsbury’s and Asda have announced plans to merge!

Sainsbury’s and Asda are the UK’s second and third biggest supermarkets and if the merger goes ahead, it will be one of the biggest the UK has ever seen, valued at around £10 billion.

J Sainsbury and Wal-Mart, who own the Asda brand, are in advanced discussions to combine the two stores. The result will be automatic promotion to the top of the UK supermarket league, knocking Tesco off the number one spot.

If this merger goes ahead it will impact the entire UK retail sector. We are expecting a full announcement on Monday 30 April, although it’s possible that they will have to disclose their intentions before trading starts on Monday.

No details of how the merger will be structured, so shareholders of Sainsbury do not know if they will lose their shares or not at the moment.

It is possible that the Competition and Markets Authority will overrule any decision.

Sainsbury has recently taken in Argos, and Tesco tookover Booker this year. The retail industry is in a state of change at the moment, as the traditional supermarkets continue to evolve to compete with the growth of online stores, such as Amazon Pantry, and the rise of budget supermarkets, such as Lidl and Aldi.

Sky News suggested that a Wal-Mart source says the reason for the merger is to lower prices – this suggests to compete with the budget chains.

More on this soon.


Barratt Developments share price increase

Barratt Today Barratt Developments saw its share price increase by just over three per cent, to 424.80 pence.

Stock market analysts believe that a combination of the Help to Buy scheme and the recent news that a new Garden City will be built has boosted confidence in the house builder.

Barratt Developments are behind the first phase of new homes built in Ebbsfleet Garden Village. Barratt’s sub-brand, Ward Homes, is building 150 houses in the Castle Hill development on the east side of the Eastern Quarry development.

Barratt are not alone in stock price rises today; Land Securities, which owns much of the land in the new Ebbsfleet Garden Village saw its share price rise by 1.45% to 1049 pence; and Taylor Wimpey Plc. had a strong day in the markets, with its stock price increasing by 2.07 per cent to 118.20 pence.

Both Taylor Wimpey and Barratt Developments are in line to enter the FTSE100, if today’s market news is a sign of a recovery in the housing sector then both may be able to get a spot in the FTSE100.

Land Securities Group shares rise on Garden City news

Land Securities share price from google

Land Securities share price from google. 12.11pm, 17th March 2014

Land Securities Group plc (LON:LAND) shares have risen by 1.45 per cent this morning following the news that the Ebbsfleet Garden City development in Kent will be going ahead, after Chancellor George Osborne gave the plans hos full support.

Ebbsfleet Valley sits between the Bluewater Shopping Centre and Ebbsfleet International rail station to the south of the Thames in Kent. It has been a part of Land Securities’ Strategic Land Portfolio for well over a decade. The first plans were put forward by Land Securities in 1996 and eventually approved in 2012.

Land Securities Ebbsfleet large

Land Securities’ Ebbsfleet development plans

Along with Ebbsfleet Valley, Land Securities also have Kodak Site in Harrow, Easton Park  and Lodge Hill in Chattenden in the Strategic Land Portfolio. The success of Ebbsfleet could provide an opportunity to develop the other regions.

The Ebbsfleet Garden City development will take at least 20 years. The first houses in the Castle Hill sector are already being constructed.

The whole of Ebbsfleet will be maintained / owned by Land Securities. There are plans for 15,000 new family homes of three and four bedrooms. More than 40% of Ebbsfleet Valley will be open space.


Barclays to sack 12,000 people to save money

Barclays_1315929Great news for shareholders, not such great news for the 12,000 employees who face losing their jobs in the near future. We are eight years into the credit crunch crisis and still the banking industry is in turmoil.

The latest challenge is that of PPI – banks are setting aside increasing large sums to pay back borrowers money for insurance schemes that they never really wanted.

Barclays employs 140,000 around the world. It has also recently announced that it will be increasing bonuses this year, more good news for the staff that remain in work. Barclays’ bonus pot has risen to £2.38 billion, an increase of 13 per cent of the last year.

CEO Antony Jenkins spoke on  Radio 4’s Today program this morning: “At Barclays, we believe in paying for performance and paying competitively.”

Barclays shed 7,650 jobs last year, so by the end of 2014 almost 20,000 bankers will be out of work.

Profits down

Profits are down, pre-tax profits have fallen to £5.2 billion. Restructuring costs have run deep over the past year.

The “Go To” Bank

Barclays is the third largest bank in the UK and Antony Jenkins is keen to keep driving the company forwards and to shake off the LIBOR scandel which clouded the end of Bob Diamond’s watch as company CEO.

Jenckins wants to see Barclays become the “go to” bank for the common people in the UK. He admits that there is still a lot of work to be done.


UK house prices start to rise – September 2013

UK house prices have started to rise, indicating that there is increased confidence in the UK housing market. Higher house prices generally means that more people are buying and selling, and more mortgages are being bought or extended. A large part of the UK retail banking sector is driven by mortgages.

Biggest jump in 6 years

Recent rises are the biggest seen in 6 years. Demand is on the up. Average property prices across England and Wales increased by 0.5 per cent in September, the highest single month gain since May 2007 – before the global economic crisis struck home.

“Help to Buy” 

David Cameron announced that the second phase of the “Help to Buy” initiative will be launched very soon. This scheme aims to help house buyers to get on the property ladder. However, Chancellor George Osborne has made a request to the BoE to ensure this scheme does not result in a housing boom. On the back of this request several housing stocks, including Persimmon, fell last week.

Beyond London

For the last few years much of the growth in house prices has been in London only, with the rest of the UK being stagnant at best. However, that trend is now changing, with more sales reported beyond London.

“Over the last few years, the housing market has been split between a buoyant London, boosted by overseas demand, and a trend of falling prices across other regions,” said Richard Donnell, director of research at Hometrack. “Now we are seeing continued house-price growth in London combining with modest gains across other regions and creating a picture of a broadening market recovery.”

More mortgages

The Bank of England reported this week that September saw a rise in new mortgages, with 62,226 new mortgages approvals, compared to 60,914 in August.

For many areas outside London there has been no growth in house prices for half a decade.

We are seeing more risk in the equity markets (although curbed by the recent European political issues in Italy) and more risk in the housing market too.


Lucazade and Ribena Sold

British brands Luxazade and Ribena are being sold off by GlaxoSmithKline to Japanese company Suntory, who already own the brand Orangina Schweppes. The brands were sold for £1.35 billion.

Why Is GlaxoSmithKline is Selling?

GlaxoSmithKline is selling its soft drinks brands so that it can focus on pharmaceuticals.

Both Ribena and Lucozade have shown strong sales in recent years, with sales amounting to around £600 million last year. However, GSK are fine tuning their marketing and business strategy and soft drinks simply no longer fit in with their corporate plan.

Both Ribena and Lucazade were founded in the inter-war period – Ribena was first sold during the 1930s and Lucazade appeared a little earlier, in 1927.

Suntory Holdings

Suntory Holdings was only listed on the stock market earlier this year on 2nd July 2013. It was founded in 1899 and is one of Japan’s oldest alcoholic beverage companies. As well as soft drinks they brew and distil a range of products including beer, rum and whisky. They also produce Boss Coffee and Iced Oolong Tea.

Royal Mail Group Ltd. To Be Privatised – How Much Are The Shares?

Postman Pat, and his Black and White Cat. Standing by his state owned red Royal Mail van.Royal Mail is set to float on the stock market as the coalition government makes one of the UK’s oldest and largest state controlled properties a private enterprise. Share may be on sale by Autumn 2013 if the plans go ahead.

Royal Mail Value

It is estimated that the Royal Mail will be valued at around £2 billion to £3 billion, with around 10% of the shares (approximately £200,000,000 worth of stock) will be distributed to the Royal Mail’s 150,000 workers.

Each worker is expected to receive, on average, £1300 with of new shares in the company.


The Communication Workers Union (CWU) are standing against the privatisation – some feel that a £1300 windfall will not be good compensation for the potential loss in workers rights in the future.

Who Will Own Royal Mail?

10% of the the business will be owned by Royal Mail workers (unless they sell their stock after floatation). It is expected that some of Royal Mail’s competitors will buy as much stock as they can. These include TNT and DHL. By doing so they may be in a position in the future to bid for a takeover attempt.

Internet Shopping Revival

The Royal Mail is focussing more of its business on parcel delivery now as Internet shopping continues to develop in the UK. Parcel delivery provides larger profit margins that letters.

Share Price

Until flotation on the stock market is finally confirmed we will not know how much the shares will cost.

What Will Happen to Postman Pat?

With the Royal Mail a private company, will Postman Pat be able to continue his role as a children’s entertainer?

Sainsbury’s Hopes For An Independent Bank

Sainsburys BankSainsbury’s Bank is currently a 50:50 partnership with Lloyds Banking Group. Sainsbury’s were the first British supermarket to open a bank (on 19th February 1997) and also the first to offer mortgages (my first mortgage was with Sainsbury’s in 1999 – I was only planning to buy the weekly groceries and ended up with a £60k mortgage for a flat in Walthamstow).

Sainsbury’s is planning to take full control of its banking services as soon as next week. It hopes to buy out the Lloyd Bank’s 50% stake in the business. Sainsbury’s will be announcing its annual results on Wednesday 9th May and it is expected that they will be making an official announcement following the reports.

Sainsbury’s has around 1,400,000 customers across a range of products from credit cards, insurance, loans, mortgages and investments.

The top managers are Sainsbury’s are all relatively new to the company. Peter Griffiths heads up Sainsbury’s Bank, in the 3 months following his appointment in November 2012 Sainsbury’s Bank reported that they had increased new business volumes by 37% year on year. David Arden, the finance director, joined in March 2012; Steve Burke, the Chief Operating Officer, started in March 2013 and Brian Monaghan, head of internal audit, joined in November 2012. All have a lot of experience in the banking and finance sector. They currently have several job opportunities in risk, marketing, audit and change / IT. They certainly appear to be planning something big.

Sainsbury’s Bank continues to grow and is in a very strong position to become an independent bank. Also, with the collapse of the deal between the Co-op and Lloyds to buy many of the old Lloyds high street banks, there could be an opportunity for Sainsbury’s to make a move on to the high street.

These changes will not affect Sainsbury’s banking customers, however, if you have any questions regarding the changes you can contact Sainsbury’s bank direct.

Sainsbury’s has made pre-tax profits of £750 million for 2012/2013. The bank has made an estimated annual profit of £25 million.

Further reading:

Sainsbury’s in talks with Lloyds over Sainsbury’s Bank control

Sainsbury’s To Bank On Lloyds Buyout

J Sainsbury Plc.

Rentokill Initial Sell Off City Link for £1

City Link vanCity Link, the courier company owned by Rentokill Initial, has been sold to Better Capital for £1.

City Link was running at a loss for 5 years and fell into debt. However, in the first 3 months of 2013 businesses started to improve. Better Capital have said that they will now invest £40 million into the business.

Operating losses were at £31 million in 2011 but recovered slightly in 2012, with operating losses at £26 million.

City Link is based in Coventry and was founded in 1969 by 2 mini-cab drivers who arranged a network of cab drivers to pick up parcels from trains to allow a UK nationwide parcel delivery service without the costs of driving cross country.

Company Information

Rentokill Initial

Rentokill Initial is a diversified pest control company. It is a FTSE 250 company (although did feature in the FTSE100 in the past) and was founded in 1903 by an entomologist who had developed a new way to kill beetles. The company was to be called Entokill but in 1925 when Harold Maxwell-Lefroy tried to register the business he could not use Entokill, so opted for Rentokill. 

The company changed its name to Rentokil Initial after BET made a successful hostile takeover bid in 1996. BET decided to retain the Rentokill brand.

Following the same of City Link, Renotokill plan to focus on their core strengths of pest control, hygiene and workwear.

Rentokill Initial Company Info


Topsy Turvy Stock Market: Retail Up, IT Down

Share prices in Marks and Spencer have risen this morning. During the first 30 minutes of trading M&S gained by 8.8%. There have been rumours of a forthcoming takeover bid for the British retail giant and this has sparked interest in the stock.

Latest: at 11.49a, M&S has risen again and is now at 400.30p, up 7.46%.

After the morning surge the share price fell back down again, and looks to be settling at around 3.5% up on the day.

Overall the UK FTSE is doing well, but one company is struggling today. Sage Group, who make software for business (mostly Accounting, Payroll, CRM and ERP) and it the UK’s largest listed software company, saw a fall of around 3.5% in the first hour of trading.

Monday morning is a day that sees the retail sector looking more buoyant and the IT industry experiencing some choppy waters.

We do not know what is happening with Sage, but with the growth of free software tools and some good cloud based premium solutions, Sage may be another company that is suffering from the growing dominance of the Internet and modern software solutions.

This is not the first time Sage Group has made the news after struggling – in July 2012 Sage announced that growth was lower than expected as its expansion into new European markets never really materialised.