Greek losses curb European gains on European stock markets

23 Dec 2014 | Author: | One comment »

Cargill Abandons Nutreco Bid.

The pan-European Euro Stoxx 600 Index extended gains as a final reading of U.S. third-quarter gross domestic product (GDP) came in at an annualized 5.0 percent.AMSTERDAM—U.S. agribusiness giant Cargill Inc. has abandoned plans to buy Nutreco NV, saying such a deal was no longer attractive, ending a bidding war for the Dutch animal-feed producer.LONDON (MarketWatch) — The broader European stock market rose Tuesday, reaching for a sixth consecutive session in positive territory, but Greek shares fell as it appeared the country is moving closer toward snap elections.

Cargill had briefly jostled with SHV Holdings NV, a closely held group controlled by the Fentener van Vlissingen family in the Netherlands, to win control of Nutreco. Cargill’s withdrawal leaves the field clear for Dutch investment firm SHV which has made an offer valuing the company at around 3.1 billion euros (2.44 billion pounds).

Europe stocks had been fluctuating during the morning session with trading volumes set to remain light this week due to the festive holidays that begin on Thursday. However, in a statement issued late Monday, the company said it ditched its plans after considering “all relevant facts, including the attractiveness of Nutreco relative to alternative potential investments.” In response, shares in Nutreco fell 5% to €44.18 in early afternoon trading in Amsterdam on Tuesday, below the €44.50-a-share bid from SHV. But as oil prices have dramatically fallen since this summer, Standard & Poor’s Ratings Services late Monday outlined concerns about highly rated oil and gas companies including Royal Dutch Shell PLC RDSB, +0.45% RDS.B, +0.30% France’s Total SA FP, +1.55% TOT, -1.56% and Italy’s Eni SpA ENI, +1.09% Total shares were up 1.1%, Eni edged up 0.5% and Royal Dutch shares tacked on 0.4%. Elsewhere in the sector, shares of Afren PLC AFR, +2.85% rose 0.7% after a ratings upgrade for the oil producer to neutral from underperform at Exane BNP Paribas.

In Greece, financial markets’ resumed their rocky ride on Tuesday, losing 2.5 percent, as lawmakers failed again to approve the prime minister’s choice of president—a result that could send the country back to the polls and into an uncertain future in the euro. Cargill, together with private-equity firm Permira, initially said in November it had approached Nutreco about a potential bid of €43.20 a share, a month after SHV agreed to buy the Dutch firm. SEPL, -0.20% The proposed deal “makes a lot of sense” in part as it could shore up Afren’s “distressed” balance sheet, wrote Exane in a note. The bidding activity around the company comes amid a spate of deals in the animal feed industry as global players seek a bigger piece of the food supply chain. Despite the competition, and its joint bid with Permira falling through, Cargill said on Dec. 11 it was still interested in buying Nutreco, without making an official offer.

One of the world’s largest listed feed companies, Nutreco has itself been trying to bolster its global position, recently buying two Brazilian feed companies to boost its emerging markets presence. Greece’s Athex Composite GD, -1.63% fell 1.7%, remaining lower after Greek Prime Minister Antonis Samaras failed to get his presidential candidate — Stavros Dimas — elected in a second round of parliamentary voting. Cargill’s decision to walk away from Nutreco came after SHV said Friday that it would declare its offer unconditional if it obtained a minimum of 67% of Nutreco shares, compared with a previous target of 95%.

There are worries in the market about the continuation of Greece’s bailout program and austerity measures if the far-left Syriza party wins in a general election. And although Syriza “softened its view on Greece leaving the euro, it would still be difficult to reconcile the party’s policies with those of the troika, suggesting a testing time would be in store for the [European Monetary Union and the European Central Bank],” Rabobank wrote on Tuesday.

Growing global demand for meat and dairy products is fueling mergers in the food and agriculture industry, making companies such as Nutreco attractive takeover targets. Elsewhere on the foreign exchange market, the pound fell against the dollar after the Office for National Statistics said the U.K’s annual growth rate was cut to 2.6%, from the initial estimate of 3%, and growth figures for the past five quarters have been downwardly revised. Cargill, which reported $135 billion in sales over the fiscal year 2014, has expanded its animal-feed business to capitalize on the intensifying appetite for protein. “Cargill would have been able to generate substantial synergies from a deal with Nutreco,” Rabobank wrote in a research note.

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