Market report: Shire dives as takeover by Japan’s Takeda looks dead in the water

Shares in Shire were on the slide on Friday as the chatter on the trading floors was that a takeover of the pharmaceuticals giant is now doomed.

Shire said yesterday afternoon that it had rejected three offers from Takeda of Japan, and that triggered the revelation that US firm Allergan had also taken a look but decided against making an offer. Shire says it wants to keep talking but traders believe enough is enough, and Takeda would struggle to put together a bigger offer.

The Japanese company is smaller than Shire and was already stretched when it made its third offer — worth £44 billion, or £46.50 a share. Takeda’s shares slipped 5% overnight in Tokyo as shareholders doubted if the firm could afford it. Shire today lost 149p at 3826p.

Engineering giant Rolls-Royce was also slipping after JPMorgan slashed its target price to 800p from 950p. Rolls said last week that it will carry out unscheduled maintenance tests on its Trent 1000 engines due to parts wearing out more quickly than anticipated.

It believes this will cost £340 million, but analyst Andrew Humphrey says this number is too low. Shares dropped 16.8p to 860p. Competitor Meggitt was up 3.2p at 457.6p after it secured a long-term supply agreement with Solar Turbines, a subsidiary of US machinery maker Caterpillar. The aerospace components manufacturer said the five-year agreement would entail the supply of electric valves and actuators for multiple engine programmes.

The FTSE 100 index added 22 points at 7350.92, with broadcaster ITV given a boost by analysts at Liberum who reiterated its Buy recommendation.Liberum is preparing for a bumper summer for ITV with the World Cup in June and July ramping up advertising spend. Shares were up 1.9p at 147.2p.

There was also plenty of action among the challenger banks as brokers suggested the industry could be about to embark on a wave of consolidation. Ian Gordon, an analyst at Investec, described Virgin Money as a sitting duck and said that it could be a prime target for Spanish banking giant Sabadell.

He added: “I think the share price should be materially higher so at the current level it looks like a compelling prospect for any predator… sooner or later someone will make an opportunist move.”

Virgin Money shares were 7.2p higher at 281.5p.

Among the small-caps, Cluff Natural Resources announced plans to raise £750,000. The company — whose chairman is larger-than-life character Algy Cluff — said that the funds will be used to evaluate new licences as well as continuing the search for investors to fund drilling.

Cluff shares were today down by 0.2p at 1.8p.