The long-running bidding war over FTSE 100 broadcaster Sky PLC (LON:SKY) looks set to finally end at the weekend as the UK’s takeover panel said the process would now go to an auction procedure at 5pm on Friday.
Due to run until Saturday evening with a maximum of three rounds, the process will pit US media giants Comcast Corp (NASDAQ:CMCSA) and 21st Century Fox Inc (NASDAQ:FOX) firmly against each other in what has oftentimes been an unexpected battle over the future of the broadcaster.
In the first round, the offeror with the lowest offer at the start of the process (currently Fox) may make a higher bid and the other suitor (Comcast) can do so in the next round. If the auction goes on, both may make an increased bid in the third round.
The bids won't be made public until after the auction's completion on Saturday evening but no later than 7am on Monday.
Following this, 11 October will become the deadline on which either offer can be declared unconditional in regard to acceptance.
During the trading day, however, investors will be sticking with the FTSE 100 for full year results, and any updates on strategy, from Smiths Group as well as the outlook for FTSE 250 constituent SIG when it reports its interims.
In the economic diary, the UK Treasury will be in focus with the latest set of public sector finances for the month of September, while across the Atlantic there will be the latest date for the US composite PMI.
Smiths Group strategy eyed after ICU deal abandoned
Following recent news that it had terminated discussions with US firm ICU Medical Inc.(NASDAQ:ICUI) regarding a potential combination with its Medical business have ended because the parties have been unable to agree the terms of a combination, Smiths Group PLC’s (LON:SMIN) full-year results on Friday will be eyed for any hints on the FTSE 100-listed firm’s future strategy for the business.
In a trading update in July, Smiths Group said its medical division was likely to post a 2% revenue decline due to some products losing certifications under a new regulation and the loss of two contracts in the US. The unit accounts for just under 30% of the group's revenues.
That expectation was echoed by analysts at Deutsche Bank, who cut their EBITDA estimates for the firm to -4% from -2% for 2018-2020 to reflect the below-expectation performance from the Medical division.
However, there were more positive noises coming from Citigroup, who initiated the firm with a ‘Buy’ rating on Wednesday saying the end of the acquisition talks showed the Medical division was “in play and the potential to unlock value trapped within the conglomerate structure.
Citi’s analysts added that the division's defensive attributes offered an “intrinsic advantage given the macro risk worrying cyclicals’ investors at present”.
Outlook and debt level key for SIG
Profitability will perhaps be the first focus for investors looking at SIG PLC’s (LON:SHI) half-year results on Friday – after that, attention will naturally turn to the second half outlook and deleveraging efforts. SIG has already flagged first-half revenue at £1.36bn, flat on a like for like basis.
In a preview note, analyst at UBS said: “We estimate Group H118 EBITA broadly flat y/y on an underlying basis (ex-property and VJ Technology) at £35mln at a margin of 2.5% (vs 2.7% in H117 and 3.1% in H217), driven by £10m in the UK at a margin of 1.6% (-130bps y/y) and £29m in Europe at a margin of 3.9% (+50bps y/y).”
“We estimate Net Debt of c£190mln (incl. the disposal of VJ by £30m) in H1 and a further reduction in H2 to c£170mln at 1.4x Net debt/EBITDA i.e. within the target range for 1.0-1.5x."
They added: “We expect unchanged guidance, in line with consensus for £82m PTP in FY18E. While this implies a sUBStantial catch-up in H2, SIG expects substantial cost benefits to come through.”
Significant announcements expected:
Friday September 21:
Finals: Smiths Group PLC (LON:SMIN)
Interims: SIG PLC (LON:SHI)
Economic data: UK public sector finances; US composite PMI