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Business - Need to Know

Afternoon Edition

Good afternoon. The war of words between SABMiller and its hopeful suitor Anheuser-Busch InBev is hotting up.

Following AB InBev's third bid for its rival yesterday, priced at £42.15 per share, SABMiller made it clear that it would not accept the deal.

ABI has responded to the rejection this morning and said it is "surprised" that SAB continues to say that the proposal "still very substantially undervalues" the company.

ABI says that argument "lacks credibility" for two reasons:

  1. The £42.15 offer is roughly a 44 per cent premium to the SAB shares closing price on September 14th (the day before the bid was revealed).

  2. Altria, the largest shareholder in SAB with a 27 per cent stake, has publicly supported the latest proposal from ABI.

Carlos Brito, chief executive of ABI, has urged the other shareholders to voice their support for the deal: “Notwithstanding our good faith efforts, the Board of SABMiller has refused to meaningfully engage with us. Our proposal creates significant value for everybody.

“How long will it be before shareholders see a value of over £42 in the absence of an offer from AB InBev? If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the board of SABMiller to frustrate this process and let this opportunity slip away.”

I don’t imagine they’ll be sitting down to enjoy a nice cold beer together any time soon. There’s more on this on the Business Now live blog.

You won't be surprised to hear that the Bank of England has held interest rates at 0.5 per cent for the gazillionth month in a row. More interesting is the minutes from the meeting, which now get released at the same time as the decision.

The split in the vote remains 8-1, with Ian McCafferty being the only hawk voting for a 25 basis point rate raise.

Going by the the language used in the minutes, it would appear that most MPC members see a relatively soft outlook for inflation (which is currently at zero), suggesting they are in no rush to raise rates.

The central bank said that cost pressures in Britain's labour market were rising too slowly for inflation to return to its 2 per cent target, especially given the past strength of sterling, and that inflation would stay below 1 per cent 2016.

As and when rates do rise, the members agreed that the “likely persistence of headwinds restraining economic growth”, would mean the Bank will raise “more gradually and to a lower level” than in previous cycles. Although it does note that will be an “expectation not a promise”.

We’ll have the full story shortly at www.thetimes.co.uk/business.

Finally, Greece's jobless rate is at its lowest level in more than three years. While it remained unchanged in July, that was from a downwardly revised 25 per cent in the previous month, according to the country's statistics agency Elstat.

The reading in July, based on seasonally adjusted data, was the lowest since June 2012 when unemployment stood at 24.9 per cent. The jobless rate hit a record high of 27.9 per cent in September 2013.

Unemployment has come down from record highs as the economy stabilised last year after a severe slump, but it remains more than double the euro zone's July average of 11 per cent.

Have a great afternoon.

Rebecca Clancy
Breaking News Editor, Business
The Times
rebecca.clancy@thetimes.co.uk

The FTSE 100 struggled for momentum throughout the morning in choppy trading in London and across other leading European markets.

Sentiment has been dampened by weak German export figures and ahead of central bank policy meeting minutes from the Bank of England, the European Central Bank and the Federal Reserve. London’s leading index edged up 11.07 points, or 0.17 per cent, to 6,347.42, broadly in line with Paris and Frankfurt.

Tesco, among the biggest risers, continues to make headway, 2 per cent dearer to 200¾p, having risen ahead of its interim results and following the release yesterday. Broker research is moving stocks. Fresnillo is the top riser, 3.2 per cent to 697½p higher, despite a fall in precious metal prices, thanks to a shove from HSBC, which has raised the miner’s target price to 810p from 760p. Glencore has headed the other way, down 1.7 per cent to 121¾p, further away from its recent 125p share sale price, after a bearish note from Canaccord Genuity on concerns about commodity prices.

Alex Ralph
Market Reporter
The Times
@alexralph

Aston Martin, James Bond's car of choice, has announced it is planning "meaningful" job cuts as part of a restructuring that will involve the company expanding into electric and "crossover" sport utility vehicles.

Expect fireworks in Congress today. The House energy and commerce committee has scheduled a hearing entitled “Volkswagen’s emissions cheating allegations: initial questions.” The committee is looking into VW’s admission that it rigged 482,000 diesel cars sold in the United States to deceive emissions tests, and pollute up to 40 times more than allowed limits. VW's north American chief, Michael Horn, and others are scheduled to testify before the panel at 3pm BST. In prepared remarks released last night, Mr Horn apologised for the scandal and said the company took full responsibility for it. He also said he would “make certain that something like this cannot happen again". What he did not do, however, is explain how it happened in the first place. Congress will want to know.

The minutes of the Federal open market committee meeting held on September 16-17 are released today at 7pm BST. It would be nice to think that the minutes will provide an indication of how close the call was not to raise interest rates and whether policy makers were worried about a slowdown in the global economy. It is more likely that they will just offer more Fed waffle of the type we have grown used to.

The number of Americans who filed new applications for unemployment benefits last week will be published today at 1.30pm BST. Economists expect that the headline figure to edge lower to 274,000 in a sign that the labour market remains fundamentally healthy despite disappointing jobs growth last month.

Alcoa, the metals company, will report third-quarter earnings today amid an environment of low aluminium prices caused by a Chinese supply glut. Analysts will be most interested in details of the company's break up, which was announced on September 28. The proposed separation of the company's legacy smelting business from its value-added sales to the automotive and aerospace industries has left analysts with questions, including how debt and pension liabilities will be divided up between the two companies. Earlier this week, the company announced a $1 billion parts deal with Airbus. Analysts expect earnings per share of 14 cents, down 55 per cent from the same period last year, on revenue of $5.69 billion, a fall of nine per cent on 2014.

Domino's Pizza, which reports third-quarter results today, has been outperforming rivals such as Yum! Brands' Pizza Hut and McDonald's due to digital investments to improve online and mobile ordering. But last week it said that that workers’ compensation and other insurance claims have recently increased in frequency and severity, leading to a six cent per share decrease in third-quarter earnings. Analysts expect earnings per share of 74 cents, against 63 cents for the same period last year, on revenue of $486.3 million, compared with $446.6 million for the 2014 third quarter.

Markets: Futures suggest a negative start on Wall Street. The Dow Jones is expected to open down 55 points at 16,759, the S&P to fall 6 points to 1,981.25, and the Nasdaq to retreat 13.50 points to 4,310.25.

Alexandra Frean
US Business Editor
The Times
@freanie

"Our central scenario is that common ground will be found and that the deal will be done given the stakes at play on both sides."
Analysts at Berenberg think AB InBev will catch their target as they need it for their next cycle of growth and SABMiller is under pressure now the deal is in the open and gaining support from its biggest shareholders.
Today's FTSE 100 risers and fallers
Up (%)
Fresnillo 3.18
BHP Billiton 2.53
Burberry Group 2.13
Tesco 1.98
Standard Chartered 1.83
* As at noon
Down (%)
Inmarsat -3.38
Aviva -1.99
Glencore -1.77
Marks and Spencer Group -1.60
Kingfisher -1.56
* As at noon
The Markets Today
FTSE 100 6,347.42 0.17
FTSE 250 16,966.78 -0.38
Cac 4,660.93 -0.14
Dax 9,968.03 -0.02
Gold 1,144.52 -0.39
GBP/US 1.53 0.18
GBP/euro 1.36 -0.35
10Y Gilts 101.87 0.28
* As at noon
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