Thomas Cook Share News (TCG)

LONDON (Alliance News) - Equities traded higher midday Monday in London after ARM Holding agreed to be taken over by Japan's SoftBank Group for GBP24.3 billion in cash, the first major UK takeover post the Brexit vote.

The FTSE 100 tech firm, which makes chips used in smartphones and other connected devices, said SoftBank will pay 1,700.00 pence per share in cash, a 43% premium to ARM's closing price on Friday of 1,188.73p and a 42% premium to the all-time high that ARM shares hit in March 2015. ARM's board said it unanimously recommends the offer.

ARM shares were up 43% to 1,696.00p midday Monday, by some distance the best performer in the blue-chip index and a slight discount to the agreed takeover price.

Liberum analyst Janardan Menon said the acquisition by Sofbank will mean ARM can continue to be independent of its heavyweight customers, who some had thought would make an takeover approach for the UK company.

"This is likely to reduce the chances of a counter-bid, particularly if Softbank can assure key stakeholders like Apple, Qualcomm and TSMC that the strategy will remain unchanged and that investments in the technology will be increased," noted Menon.

Philip Hammond, the UK's newly-appointed Chancellor of the Exchequer, said Softbank would double the number of jobs in ARM in the UK over the next five years and "turn this great British company into a global phenomenon".

Hammond added that the deal "confirms that Britain remains one of the most attractive destinations globally for investors".

Jasper Lawler, market analyst at CMC Markets, said the Softbank purchase of ARM is both opportunistic, given the depreciation of the pound versus the yen since the EU referendum outcome, and a "big forward-looking play" on the future of technology in the internet of things.

Laith Khalaf, senior analyst at Hargreaves Lansdown, believes the takeover is not the result of the currency movements after the Brexit vote, but noted the weaker pound does make some UK companies cheaper.

"This takeover could act as the starting gun for more M&A activity," Khalaf said.

While IG's senior market analyst Chris Beauchamp agreed that UK companies will look more attractive given the weaker pound, he added than uncertainty will hold foreign investors back.

"It won't be an ugly rush, since ongoing political uncertainty will make it even more important for acquisitive firms to pick their targets carefully, and questions will linger over just how protectionist the UK may become with regards to some of its prized assets. Nonetheless, as a sign of confidence, the deal is very welcome indeed," Beauchamp said.

The deal also helped lift fellow London-listed chip maker Imagination Technologies Group, which traded up 10% at midday.

The FTSE 100 index was up 0.3%, or 22.35 points, at 6,691.59. The FTSE 250 was up 0.8% at 16,868.41 and the AIM All-Share was up 0.3% at 726.63.

The pound spiked briefly Monday morning after Bank of England monetary policy committee member Martin Weale said the uncertainty from "Brexit" suggests waiting for firmer evidence before taking any action.

In his final speech as an MPC member, Weale said there is a "high degree of uncertainty" surrounding the MPC's estimates of the long-term implications for Britain of leaving the European Union for the August inflation report due on August 4.

"This uncertainty points to the argument that we should wait for firmer evidence before making any policy change and least in the absence of any strong arguments for an immediate change," he said.

"The Old Lady of Threadneedle Street is not a nurse to markets," Weale added.

This contrasts with the view given by fellow MPC member Andy Haldane on Friday who said that "material easing of monetary policy" will be required next month to maintain confidence in the UK economy.

The pound hit a high of USD1.3292 but at midday traded at USD1.3226. At the London stock market close on Friday, sterling traded the dollar at USD1.3232.

On mainland Europe, the CAC 40 in Paris was down 0.4% and the DAX 30 in Frankfurt was down 0.2%.

Ahead of the open on Wall Street, futures pointed the Dow Jones Industrial Average, Nasdaq 100 and S&P 500 indices all up 0.1%.

The highlights in the US earnings calendar are second quarter results from Bank of America and IBM.

Travel operators were again amongst the worst performers in London's main indices after the failed military coup in Turkey added to the already damaged sentiment on the sector. The political turmoil in Turkey came after the terrorist attack in Nice, France last Thursday.

Numis said the geopolitical tensions will place further strain on the travel and leisure sector which already was under pressure in the aftermath of the UK's vote to leave the European Union

The bank highlighted that mid-cap operator Thomas Cook Group had around 20% of its summer 2016 capacity in Turkey at the start of the year, making it the most exposed to the region. The stock traded down 2.8%. TUI Group was one of the worst performers in the FTSE 100, down 2.7%.

Transense Technologies share price surged 49% after the sensor systems manufacturer said it has signed a licensing agreement with US conglomerate General Electric and said trading in the first half met its expectations.

The company said GE has agreed to licence its Surface Acoustic Wave technology for certain torque applications. GE will pay USD500,000 to Transense on signing of the deal, plus another USD250,000 dependent on the technology passing various tests GE will conduct. GE will then pay Transense royalties on each unit which uses the technology.

Television and broadcasting software provider Mirada was down 18% after it reported a widened pretax loss for its financial year to the end of March, hit by one-off charges and higher investments in its products.

Mirada said it made a GBP829,000 pretax loss in the year to March 31, compared to a GBP113,000 loss a year earlier, driven by higher amortisation charges and administrative costs. This included increased product investment spending and a one-off tax charge booked on the lease of its office in Wapping, east London.

Revenue rose 6.0% to GBP6.0 million from GBP5.7 million, helped by the roll-out of Mirada technology on the Televisa Group-owned Cablevision Monterrey network in Mexico. Mirada said its pipeline in other markets in South East Asia and Eastern Europe also is growing.

The US National Association of Home Builders' housing market index is still to come in the economic calendar at 1500 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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