Market Report: Ophir Energy £260 million swoop on Salamander fails to fire shareholders

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Ophir has tabled a £260 million all-share offer for South Asia-focused Salamander. That’s roughly 103p a share, a price analysts at FirstEnergy conceded was “underwhelming”.

It must seem paltry compared with the 121p-a-share cash offer, plus a bonus payment if the assets came good, that was mooted by Spain’s Cepsa. That deal fell through after Salamander lifted the lid on negotiations. Still, beggars can’t be choosers and Salamander ticked up 1.75p to 92.5p.

Ophir shareholders were less impressed. Management’s pitch is that the acquisition will accelerate its push into Asia, while Salamander’s cashflow can also fund continued exploration.

But the offer was accompanied by news of two dud wells in Tanzania and, with oil prices tumbling, some are sceptical of the strategy. Liberum said it “struggles to see the attraction of the combination” while Westhouse Securities downgraded the company to a sell. Ophir Energy dropped 9.1p to 170.75p.

The blue-chip index enjoyed an upbeat end to the week, rising 28.82 points to 6707.72. WM Morrison improved 2.7p to 186.1p as analysts made positive noises about a recent investor trip. Jefferies believes the grocer is “better equipped than peers in pursuing discounters on value”.


Royal Mail slipped 7.8p to 421.8p as Credit Suisse and Berenberg trimmed their target prices. Inter-dealer broker Tullett Prebon lost 13.7p to 254.5p as it raised £32 million through a placing at 248p to fund the acquisition of oil broker PVM Oil Associates.

Analysts questioned the deal when it was announced in May, with Tullett’s revenues under pressure from sluggish markets and a regulatory squeeze on bankers.

Serco’s dreadful run continues, losing 11.5p to 167.55p after Credit Suisse warned of “huge uncertainty around the operational cashflows” and predicted no dividend until at least 2016. The troubled outsourcer has fallen 47% since its profits warning 10 days ago.

TalkTalk was on the slide as the scribblers at Berenberg took the red pen to the company over a level of churn (customer turnover) among its TV customers that the banks described as “worrying”. Berenberg’s Barry Zeitoune warned a profit warning may be likely. TalkTalk fell 6.3p to 287.15p.

Cloud computing specialist Outsourcery’s momentum continued, climbing 6.25p to 21.25p as Investec  told investors to buy. Even though it needs to “prove it can deliver” the promised level of business, Investec thinks the firm, headed by Dragons’ Den star Piers Linney, has long-term potential.

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November 22, 2014 |
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