Yahoo Finance Market report: Fevertree shares pop on swirling takeover talk
City whispers speculating that consumer goods giant Unilever is set to swoop for rising star Fevertree Drinks caused the upmarket tonic water maker’s shares to fizz on London’s junior market.
Swirling rumours mooted that Unilever will try to snap up the posh drink mixers company to help lift its ailing growth but will have to pay at least £28 per share for the investor darling, valuing the company at more than £3.2bn. The rumour mill swung into action after Fevertree appointed Kevin Havelock, Unilever’s global president of Refreshment, as a non-executive director last week.
With Fevertree relying on distribution deals outside of the UK, its growth could be catapulted by Unilever’s wide reach, and synergy savings would also be created by a tie-up, one analyst argued. However, Unilever’s preference to trade with supermarkets and wholesalers rather than Fevertree’s clientele of mainly restaurants and bars lessens its appeal.
Drinks giants Diageo and Pernod Ricard were also rumoured to be in the hunt for the company as a perfect tonic to their alcoholic drinks ranges, but the Aim-listed company’s collaborations with a wide array of drink manufacturers could prove a stumbling block to a bid.
Drinks giants might not be willing to continue existing collaborations with Fevertree if it was snapped up by a rival, possibly stunting its growth, and soft drinks suitors could face a tricky path to a deal by competition laws.
Fevertree has been transformed from a market minnow into the fourth-largest company by market capitalisation on the Aim market as the gin craze sweeps the UK, lifting its shares by 307pc in just two years. Shares jumped a further 50p to £21.72 on City chatter over a tie-up.
Elsewhere, roadside rescuer AA dived back towards record lows after Barclays analysts warned that winter weather could have weakened its recent performance.
The cold blast in December triggered the busiest day for breakdowns in the last seven years and Barclays noted that AA has to rely on third-party garages to meet demand if the number of breakdowns soars past a certain limit on its busiest days. Its share price has failed to recover from its plunge in August when the FTSE 250 company ousted its chief executive Bob Mackenzie for a punch-up in a hotel bar, and its shares reversed a further 11.2p to 154p on fears of winter woes.
Construction contractor Balfour Beatty jumped 4.5p to 295.6 after telling shareholders that it expects a £20m boost from Donald Trump’s tax cuts, clawing back some of the losses it made after Carillion’s collapse.
Estate agents Rightmove and Foxtons tumbled 170p to £43.91 and 5.4p to 76.6p, respectively, as investors were spooked by peer Countrywide plunging 19pc on a profit warning.
JD Sports slumped 17.2p to 377p after analysts at Bank of America Merrill Lynch became the first to remove the “athleisurewear” seller from its “buy” list, while asthma inhaler maker Vectura slipped 5.1p to 111.8p after N+1 Singer downgraded it to “hold”.
The FTSE 100 extended its losing streak to a fourth day, pulling back 24.47 points to 7,700.96 with heavy falls from Primark owner Associated British Foods and SSE weighing heavily on the index.
