Connect dives as failed sale of books unit raises prospect of legal battle

Mark Shapland
City was less than impressed with the lack of M&A action today: AFP/Getty Images

A string of delayed and failed deals left investors frustrated as they began the week keen for M&A news.

Shares in small cap Connect Group, formerly Smiths News until its rebrand in 2014, were smashed after its disposal of its books division to German investment company Aurelius Equity Opportunities hit the skids.

Despite being given the green light by the German Federal Cartel Office, Aurelius yesterday wrote to Connect stating that it “can no longer complete on the current terms as we, the directors of Aurelius, can see no way of financing this transaction”.

Shareholders ran for the hills, following Connect’s statement saying a legal battle could ensue.

The firm said: “Connect has sought urgently to clarify Aurelius’ position, including the legal basis upon which it purports not to complete on the transaction, and we have reiterated in writing that Aurelius is legally obliged to complete the transaction on or before January 31.”

To make matters worse, annual revenues declined to £564.5 million from £584.9 million the year before.

Shares were down 30.6p at 75p, with analysts at Berenberg duly cutting the firm’s price target.

In further frustration for investors IWG, the office renter formerly known as Regus, said its talks with Brookfield Asset Management over the weekend over a possible sale had been delayed.

Brookfield, the Canadian private equity investor, had until Saturday night to make an offer, but the Takeover Panel agreed to put the date back to 5pm on February 2.

But it is understood that IWG’s largest shareholder and founder Mark Dixon does back the sale, sending shares up 5.9p at 272.6p as investors bet that the deal will happen.

Meanwhile AIM-listed Fever-Tree saw its shares rise 107p at 2,491p after speculation continued that Unilever could buy the posh tonic firm. Fever-Tree has not commented.

Elsewhere the FTSE 100 was in a bit of a slumber, unmoved and up just 4.20 points at 7735.10.

Barclays was making gains on reports that US hedge fund Tiger Global has invested more than $1 billion in the British bank in a bet that backs chief executive Jes Staley’s turnaround plans.

Tiger snapped up its 2.5% stake when the bank’s shares slumped to a 52-week low of less than 180p in November.

Shares this session gained 3.5p at 203.8p, but its peer Royal Bank of Scotland fell 2.3p at 295.1p and HSBC lost 4.3p at 784.1p.

Finally, Sainsbury’s received a less than glowing report from brokers at Credit Suisse, who believe its core grocery operations are under threat and that the acquisition of Argos, bought for £1.4 billion in 2014, has yet to bear fruit.

Investors shrugged the report off and shares were little changed at 257.7p.