But if blue chips were short-changed second-liners were mugged
But if blue chips were short-changed, second-liners were mugged. After being hit much harder than the leaders in Tuesday's debacle they suffered the mortification of clawing back a mere 6.4 of the 90.6 points surrendered by the supporting 250 index. Second- and third-liners inevitably lag their blue chip peers but this week's display indicates the gap is yawning wider. Signs unsettled unit trust holders, finding the emotion of the turmoil too much, were cashing in have so far made little impact. Shares displayed a little more poise as New York offered further encouragement, letting talk of a crash, or even a bungee jump, fade into the background. Its hopes of securing approval for the deal received a boost on Monday when M&G, which speaks for 7.36 per cent of Costain, came out in support of the deal.However the outcome of the vote is likely to hinge on Saudi-based Raymond International, which holds 19 per cent It has yet to comment about its intentions.. Costain's bankers could be left with up to 35 per cent, depending on the take-up of the three-for-one offer at 50p by existing investors.Costain said it had received strong support from UK institutional shareholders.
"Any suggestion of a three-month moratorium is therefore unrealistic," it added.Costain's chief executive, Alan Lovell, has threatened to put the company into administrative receivership if the proposals are rejected.The rescue deal involves a pounds 73.6m share issue which would give up to 40 per cent of the enlarged share capital to a Malaysian construction group, Intria Berhad. "The proposals are the only realistic [ones] available to secure the future of the company for shareholders," a statement said.Costain also noted that a recent circular sent to shareholders made it clear that the rescue package was the only way of securing continued support from the banks to continue trading. The Kuwaiti construction firm Kharafi, which owns 19 per cent of Costain, has accused the company of trying to railroad investors into accepting the rescue, saying it would vote against the plan at a shareholders' meeting in London on Monday. But yesterday Costain hit back. Costain, the troubled construction group, yesterday rejected criticism made by a large Middle East shareholder against a controversial refinancing plan and urged investors to vote in favour of the deal next week. The committee also concluded that the directive did not meet the requirements set down by the EU for subsidiarity - the principle that, wherever possible, decision-making is devolved to national level - while safeguards in the directive to discourage target companies from appealing to the courts were insufficient.The UK's efficient system for the regulation of takeovers"should not be put at risk without substantial and clearly identifiable benefits", said the report.. The Panel has launched a fierce rearguard action to have the directive ditched, warning that it would create a lawyers' paradise with target companies running to the courts to frustrate hostile bids. In a 160-page report released yesterday the Lords committee says the directive might prevent the Panel from applying the Takeover Code with sufficient certainty and flexibility and increase the risk of "tactical litigation".
The House of Lords Select Committee on the European Communities said that harmonisation gains from adopting the directive would be outweighed by the damage it would do to existing arrangements in the UK where the Takeover Panel supervises contested bids through the application of the City Takeover Code. As a result of poor trading, cash flow has fallen from last year and, with higher capital expenditure, net borrowings have climbed from pounds 189m to pounds 213m over the six months to June.The news prompted analysts to cut forecasts by up to pounds 18m, leaving a wide range of current-year expectations from pounds 52m to pounds 69m.One analyst said the continuing problems of the market were not a great surprise, but added that the company had problems of its own in North America.. A cross-party committee of peers has called on Brussels to abandon proposals for a European takeover directive which would replace Britain's non-statutory arrangements with a legally-binding system for controlling behaviour during bids. It has been hit by destocking, which first became evident at the end of last year.
In a statement yesterday, the group said low production rates at paper mills had caused "severe" trading conditions in the second quarter of the year.European mineral volumes had slipped 16 per cent against the first half of last year, while in the US AmPac business, underlying volumes were down 11 per cent, when the effects of last year's acquisition of the Genstar calcium carbonates operation were stripped out.Margins have been hit in all divisions, with the effects of lower volumes at AmPac exacerbated by product mix and manufacturing efficiency problems. Since the preliminary results were announced in March, Dennis Rediker's first since taking over as chief executive from Andrew Teare, City projections of current year profits have nearly halved, tumbling from just short of pounds 100m to as low as pounds 52m or so yesterday. At that level, profits would be insufficient to cover the dividend, which absorbed pounds 51.1m in after-tax profits last year.ECC is heavily reliant on the paper industry, which is a big customer for the group's kaolin and calcium carbonate products for use in coating and "filling" paper. "I'd be a big seller at 180p."To match Iceland's yield, analysts noted that shares in Somerfield would have to be floated at about 170p, valuing the company at pounds 510m.Falling share prices in London and New York have dented confidence in the new issues market.
Shares in nuclear generator British Energy went to an embarrassing discount this week while Monsoon, the fashion retailer, abandoned its flotation plans last week.And some analysts, worried about Somerfield's position in the cut-throat food retail market, reckon the company is worth as little as pounds 450m. However, Somerfield denied the Iceland profits warning would have an impact on potential investors.Doubts over the float will raise concerns among Somerfield's creditors. Some pounds 192m of flotation proceeds will be paid to the Somerfield holding company to reduce its debt. The remainder will be passed on to the previous holding company, Isosceles, which is expected to pay its senior creditors in full.. A large-scale shake-up at English China Clays, the world's biggest producer of minerals for the paper market, was in prospect yesterday after the group warned that continued destocking in the paper industry had hit first- half trading. ECC said it was involved in "an intensive review to address the group's strategy and performance improvement".