Company in preliminary discussions about all-share merger, but City says rival bid could be flushed out

IT group Misys has been in the spotlight again in recent days as a possible takeover target, with traders suggesting a new move from US group Fidelity National Information Systems (FIS) which has already walked away once.

But an announcement that the company is in fact in merger talks with Swiss rival Temenos has caught speculators on the hop. Misys said it was in preliminary talks with the Swiss about an all share merger, although there was no guarantee a deal would be completed.

Disappointment that it was not a bid complete with a premium has sent Misys shares 2.5p lower to 323p, even though some are hoping the news will indeed flush out another predator. George O’Connor at Panmure Gordon said:

It was probably someone in corporate finance who cooked this one up – Temenos wants to expand in the US (Misys has a slim 18% of revenue there) and Misys wants to do ‘something’ (Temenos is something). Operationally the phrase ‘buggers muddle’ springs to mind in terms of the difficulties in banging these two businesses together – however this likely translates in capital markets speak to ‘cost synergies and ‘products dovetailing into each other’.

Bulls will suggest that FIS will use this to counter-bid Misys at 450p or so – more likely FIS is watching squeamishly from the isles. To reflect bid premium we ratchet up our target price to 385p from 334p and move from hold to buy – we are not going to stand in the way of the party – however the risk is that the vague counter-bid rumours (FIS again) push the price higher; consequently, we would therefore take profits north of 400p.

Julian Yates at Investec was also unconvinced and wondered about the timing of the deal:

In the past this deal would have made sense. Misys did not have a credible next generation core banking product, but had a large installed base. Temenos had a leading product, but not the deep customer base.

However at last Misys has the new competitive bank fusion offering and early take-up signs are very positive. On this basis the benefits of merging with Temenos are not as clear cut as they were previously and as such it seems strange timing for Misys to ‘need’ to merge. However there will likely be potentially material cost savings and current trading may be pressuring both companies to talk.

Due to the very early stages of these announcements, it seems to us that there is a prospect that another bidder may come into the fray. A cash offer would surely be more attractive to shareholders.

Glencore approach to Xstrata lifts mining sector, but results from Unilever disappoint

On a busy day for corporate news, Vodafone was one of the big risers after an Indian court ruling appeared to favour the company’s mobile business in the country.

The supreme court has cancelled 122 licences granted to new entrants in 2008 by the former telecoms minister, and the regulator has been told to make recommendations for their re-allocation within a month. The ruling does not affect licences held by the three largest players in the area, Vodafone, Bharti Airtel and Reliance Communications. Ratings agency Fitch said the move – which follows a long running investigation into the licence awards – could strengthen the trio’s hand by reducing competition.

Analyst Jerry Dellis at Jefferies said:

If today’s ruling is enacted in its current form (not a foregone conclusion), Vodafone stands to benefit from weaker players exiting the market, achieving long-anticipated consolidation. And it may be possible for Vodafone to acquire some of the licences given up, alleviating spectrum shortages in some areas. (We understand that there is nothing in the Supreme Court ruling that suggests the licences and the spectrum allocated to them be de-linked.)

But the economic upside may be limited. The government’s agenda remains firmly pro-competition, and it may shape the new framework to make life easier for the smaller players in other areas, e.g. spectrum fees, taxation.

Vodafone edged up 0.25p to 170.8p, helped the FTSE 100 climb 5.35 points to 5796.07 – a new six month high, just.

The leading index suffered a two way pull during the course of the day.

On the positive side, miners were energised by news of the proposal from Glencore, up 29.95p at 461.7p, to merge with Xstrata, 111p better at 1230.5p and create an $82bn commodities giant. Lonmin, where Xstrata owns around 25%, rose 22p to £10.82 while Anglo American added 97.5p to 2830.5p on talk that stage 2 of Glencore’s strategy would be to snap up Anglo. But Eurasian Natural Resources Corporation, which had been a previous target for Glencore, edged 12.5p lower to 705p on the theory that the Xstrata deal made a bid for the Kazakh miner less likely.

But a wave of disappointing corporate news proved a drag on the market. This included Unilever, down 91p at £19.94, Royal Dutch Shell – whose B shares lost 28.5p to 2297.5p – and AstraZeneca, 105.5p lower at £29.84.

An exception was medical devices group Smith and Nephew, up 27.5p to 640p.

Elsewhere Imperial Tobacco rose 5p to £23.08 as Nomura moved from reduce to neutral, mainly on the grounds it could be a merger target. Nomura said:

Post the resolution of government stake sale at Japan Tobacco in April/May, and the medium term strategy outlook presentation from Japan Tobacco as well in April, we see the investment case [for Imperial] inevitably being more influenced by prospects for consolidation activity and less influenced by prospects for earnings cuts on risks of underperforming versus consensus (volumes and margins).

We see the market focusing on the prospect for M&A in the space given the flexibility and ambition at Japan Tobacco (and BAT). This will be supportive, we think, and hence now see no opportunity to be actively underweight from here.

On the economic front, investors were still awaiting an agreement between Greece and its private bondholders, which would pave the way for the latest bailout payment. In the UK weekly jobless claims fell 12,000 to 367,000 ahead of Friday’s non-farm payroll numbers, which are forecast to show a rise of between 135,000 and 150,000.

Among the mid-caps waste management group Shanks added 13.15p to 113p on speculation that failed suitor Carlyle, the private equity group, might be considering another approach. At the same time Shanks announced an award of 887,000 share options to new chief executive Peter Dilnot as part of a long term incentive scheme.

But WH Smith lost 22p to 537p after chief executive Kate Swann raised around £2.3m after selling 425,000 shares at 550.7p a week after its trading update.

Finally ValirX, a life science company, jumped 23% to 0.675p in heavy trading, after its cancer screening test biomarker had received patent approval by the European patent office.

As long as we allow proponents of unconventional oil and gas to claim a false choice between energy and economic security and the environment, and as long as we allow them to vilify opponents as being somehow unpatriotic or radical, we run the very real risk of losing a battle where the future of our planet and species is at stake. Ok, so maybe I am being a little bombastic. But am I wrong?

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As long as we allow proponents of unconventional oil and gas to claim a false choice between energy and economic security and the environment, and as long as we allow them to vilify opponents as being somehow unpatriotic or radical, we run the very real risk of losing a battle where the future of our planet and species is at stake. Ok, so maybe I am being a little bombastic. But am I wrong?

read more

As long as we allow proponents of unconventional oil and gas to claim a false choice between energy and economic security and the environment, and as long as we allow them to vilify opponents as being somehow unpatriotic or radical, we run the very real risk of losing a battle where the future of our planet and species is at stake. Ok, so maybe I am being a little bombastic. But am I wrong?

read more

How will we feed ourselves with dwindling oil supplies and a changed climate? Wes Jackson pioneered perennial grains, described in this speech to ASPO 2011 in Washington. Plus assessment by Australian carbon scientist Dr. Michael Raupach.

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How will we feed ourselves with dwindling oil supplies and a changed climate? Wes Jackson pioneered perennial grains, described in this speech to ASPO 2011 in Washington. Plus assessment by Australian carbon scientist Dr. Michael Raupach.

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Where will computing go in the coming years? I thought I should find out, so I watched a roundtable and other talks and interviews on the subject (warning: it’s pretty dry stuff). I came away underwhelmed. I struggled to figure out what these guys were seeing that I wasn’t. I’m not sure I’ve figured it out. Eventually I came back to the one key issue that’s missing from their roundtable conversation—and that of most conversations among engineers in the computing world—limits, both ecological and material.

read more

Where will computing go in the coming years? I thought I should find out, so I watched a roundtable and other talks and interviews on the subject (warning: it’s pretty dry stuff). I came away underwhelmed. I struggled to figure out what these guys were seeing that I wasn’t. I’m not sure I’ve figured it out. Eventually I came back to the one key issue that’s missing from their roundtable conversation—and that of most conversations among engineers in the computing world—limits, both ecological and material.

read more

Where will computing go in the coming years? I thought I should find out, so I watched a roundtable and other talks and interviews on the subject (warning: it’s pretty dry stuff). I came away underwhelmed. I struggled to figure out what these guys were seeing that I wasn’t. I’m not sure I’ve figured it out. Eventually I came back to the one key issue that’s missing from their roundtable conversation—and that of most conversations among engineers in the computing world—limits, both ecological and material.

read more