UK house prices fall; Takeover drama at Shire and Virgin Money – business live

The sun rises over the City of London.

Nick Field, Director at corporate finance adviser Livingstone, reckons that merging Virgin Money into Yorkshire Bank and Clydesdale would make sense:

‘Creating a ‘challenger’ bank of real scale with total assets in excess of £80 billion clearly has attractions. As both parties have relatively strong retail deposit franchises, the realisation of synergies on the asset side of the balance sheet and in operational costs will be key to drive value for shareholders in the merged group.’

‘The Virgin Money team have a great track record of execution having turned a legacy mortgage portfolio into a strong, growing consumer brand covering a range of financial products. The value of that strong brand and management is tangibly expressed by the price reaction to the offer, with Virgin Money enjoying a considerable premium whilst CYBG has slightly declined.’

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The oil price is likely to move sharply at 7pm UK time, when Donald Trump reveals his decision on Iran.

Ole Hansen, Saxo Bank’s Head of Commodity Strategy, says:

There are multiple options available to President Trump which makes this such a binary event where the price could move sharply in either direction. The three most likely options currently being mentioned are:

1) Waiver the sanctions again while allowing time to renegotiate the deal

2) A soft exit being the refusal to waive sanctions on Iran’s oil export. It would give companies 180 days to wind down their deals before sanctions are implemented. Furthermore it would provide the US and Europe more time to find a common ground.

3) A hard exit which could see Trump remove the waiver with immediate effect

The financial markets are becalmed today, with very little action to report.

In London, the FTSE 100 is up a mere 9 points at 7576 this lunchtime, as City traders abandon their terminals to sunbath.

The oil price is down a little, with Brent crude off 0.6% at $75.66 per barrel. Yesterday it reached its highest level since 2014, ahead of Donald Trump’s decision on whether to allow sanctions on Iran.

This would be the first step towards ending the nuclear deal agreed by Barack Obama’s administration (in which sanctions were lifted, in return for Iran halting its nuclear weapons programme).Analysts fear that ending the deal could spark new tensions in the Middle East, and also destabilise the Iranian economy.Trump, though, has long argued it’s a bad deal, and may now act…..

If Takeda can win shareholder support, then it will acquire Shire for 64.4% more than its value back in March.

Such a whopping premium shows that the Japanese firm is desperate for Shire’s pipeline of rare drugs, and its established sales in America.

Associated Press explains:

Shire gives Takeda a larger presence in the U.S. and expertise in rare diseases, an increasingly important area for pharmaceutical companies as patents on established drugs expire.

Even though Shire’s headquarters are in Dublin, it earns more than two thirds of its revenue in the U.S. on drugs like Adderall, which is used for ADHD.

Takeda, meanwhile, has like many Japanese companies been expanding overseas to compensate for slowing growth at home. Last year it bought Ariad Pharmaceuticals of Cambridge, Massachusetts. Takeda is valued at about $34 billion and makes almost half of its sales in Asia, and about a third in the U.S. Among its top sellers are Entyvio, used to treat ulcerative colitis, and cancer drug Leuprorelin.

In other banking news, Royal Bank of Scotland is refusing to abandon plans to close 50 branches in Scoland.

C EO Ross McEwan told MPs on the Scottish Affairs Committee that the decision was the “best way of going forward”, despite public anger over the plan.

“I do recognise that customers are very disappointed that their local branch is closing”.

“What we’ve done here with a package of different ways of operating with this bank is, I think, the best way of going forward, that we can keep those services to our customers as well as moving away from physical distribution when it’s just not being used.”

That’s not going to please RBS customers who find that their nearest branch has closed. In theory, new technology means less need for banks to maintain a physical presence on the high street; in practice, TSB’s tech meltdown has shown the problems with that approach.

ack in the City, Shire’s share price has dipped below the £40 mark.

At £39.90 (up 3.5% today), it’s further away from the £48 per share which Takeda has agreed to pay.

That underlines the fact that shareholders may not back Takeda’s offer, even though Shire’s board have accepted it. The Japanese firm will hope to change the City’s mind in the months ahead, and points out that the deal isn’t meant to complete until next year.

But Takeda certainly has work to do to pull off the biggest pharmaceuticals deal since 2000, as David Madden of CMC Markets explains:

Shares in Shire have been given a nice boost in recent weeks after Takeda made two unsuccessful bids for the company.

On the other side of the coin, Takeda’s share price has dropped over 30% since the January high, and given the negative market reaction to their pursuit of Shire, there may be some investors who are sceptical about the offer.

Another 35 workers have lost their jobs following the collapse of construction and outsourcing group Carillion.

The Official Receiver, which took control of Carillion after its liquidation in January, announced the bad news this morning. It means that almost 2,300 of the company’s 20,000 workers have been laid off, while 11,489 have been saved.

The news comes as MPs hold an investigation into the lessons that can be learned from Carillion.

Phil Bentley, the CEO of outsourcing group Mitie, told the Public Accounts Committee it was “very sad” to see more than two thousand people losing their jobs.

He argued that Carillion was brought down by problems at its construction arm – where cost overruns at several contracts created a “perfect storm”, claiming:

It’s not a failure of the outsourcing model.

Bentley also pointed to Carillion’s used of ‘off balance sheet’ instruments, which made it harder to tell the strength (or weakness) of its balance sheet.

Rupert Soames, CEO of outsourcer Serco, argued that the government should get some credit for its handling of the crisis.

Because ministers did their homework early, they were ready for the moment that Carillion “tried to put a gun to their head” and demanded support, explained Soames. The government didn’t cave in, as it knew what would happen if Carillion went into receivership.

I don’t know about a single hospital floor that been left uncleaned or a school meal that’s not been delivered, because the government did its contingency planning.

Soames defended the outsourcing model used in Britain today, saying there is close scrutiny of the private sector companies who help to run public services.