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Lloyds Banking Group today sold a 10% stake in London-based residential property developer Quintain Estates & Development, which it acquired along with duff bank HBOS earlier this year, notching up a thumping loss of almost £100 million.
Shares of Quintain, which has the rights to build about 15,000 homes in areas such as Wembley and Greenwich, slid 16½p to 206p, having struck a year's high of 222p last week. That compares with a record 960p a couple of years ago, before the slump in the housing market.
Stockbroker Cazenove is reckoned to have placed the 13 million shares, or 10% of Quintain, with various institutions at 203p. HBOS paid property developer and former Tottenham Hotspur director Paul Kemsley 927p a share for its original 14% stake in July 2007 with a view to making a full bid for the group. It even called in Merrill Lynch to help mastermind the deal. But when the finance dried up and HBOS was unable to find a partner, the takeover was abandoned.
By then, HBOS had established a formidable track record in buying up developers, snapping up names such as Crest Nicholson, McCarthy & Stone and Countryside Properties. It also backed Elliott Bernerd's £2.1 billion management buyout of Chelsfield. Lloyds retreated 1.7p to 104.4p.
Elsewhere, shares of the UK's two biggest package holiday operators were enjoying a blue-skies scenario today as they led the market higher. TUI Travel sported a rise of 9.5p to 266.3p and Thomas Cook rose 8.7p to 253.7p as a large overhang of stock was cleared.
A consortium of banks, including BayernLB, Royal Bank of Scotland and Commerzbank, was looking to place a 43.9% stake worth an estimated £850 million in Thomas Cook, belonging to the German retail giant Arcandor, which went bust in spectacular fashion in June, wiping out the £3.4 billion fortune of its biggest shareholder Madeleine Schickedanz and putting 40,000 jobs at risk.
The consortium operated an accelerated bookbuilding exercise of 377 million shares before placing them at 240p with various institutions. The placing was well-covered, with the book closed before the start of official trading. Meanwhile, Collins Stewart has raised its rating on both Thomas Cook and TUI from sell to hold.
Shares generally ran out of steam after an early mark-up. Investors chose to take profits ahead of the Bank of England's decision at midday to keep interest rates unchanged at 0.5%. The FTSE 100 index, which yesterday climbed back above 5000 for the first time in a year, fell 37.95 to 4966.35. Even so, investors continue to express growing confidence in the economy and are pinning their hopes on a pick-up in corporate activity.
The equity market has now rallied 44% since its low point in March but remains well short of its record high of 6950.6, achieved on 30 December 1999. Wall Street made a lacklustre start this afternoon with the Dow Jones was down 0.91 at 9546.31.
Chloride stood out with a rise 6.7p to 167.9p on talk of a major government contract to supply electric recharging points for cars at garages. Dealers also still remember last year's abortive bid of 256p a share from Emerson Electric in the US. The Chloride management held out for more than 300p a share.
Big finds around the world are doing little to improve the outlook for the oil sector. HSBC warns the industry faces headwinds despite looking undervalued longer term. The broker blames weak oil prices, cheap US gas prices and continued softening of refining margins.
It is has repeated its 2010 forecast for Brent crude of $75 a barrel but warns of short-term weakness in the price. BP, 8.2p cheaper at 545.9p, is downgraded from overweight to neutral with Royal Dutch Shell, down 20p at 1690p, cut from neutral to underweight.
Anglo-Swiss mining giant Xstrata, down 11p at 893p, still has not decided whether to make a hostile bid for rival Anglo American, or walk away after its initial nil-premium merger plan was rejected. Anglo, 19p lower at 2027½p, is continuing to consult shareholders. Meanwhile, Citigroup reckons there is scope for improvement in Anglo American shares, and has jacked up its target from 1700p to 2200p.
Desire Petroleum, up 24p at 87¾p, has signed a deal with Diamond Drilling to take a rig to the North Falkland basin. The rig will be mobilised in November and reach the Falklands early next year. Desire is also looking to raise between £20 million and £30 million to fund more wells while the rig is in the Falklands.
