Sector movers: Unilever and Bovis Homes drag market lower

Unilever dragged on the Personal Goods sector and the broader market after Chicago-based Kraft Heinz dropped plans for a hostile takeover over the weekend, emphasising that it had done so in "amicable" fashion.

On Sunday, Unilever released a statement saying: "Unilever and Kraft Heinz hereby announce that Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies.

"Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever."

Under UK Takeover Panel rules Kraft would now need to wait at least six months before it could table a new offer.

Kraft had offered Unilever $50.00 per share in a mix of $30.23 per share in cash payable in US dollars and 0.222 new enlarged entity shares per existing Unilever share.

Jefferies said it expected Unilever's shares to revert to something closer to where they were on Thursday.

"But we expect the seismic shock to reverberate for a while yet: not least in terms of what it means for value perceptions of Unilever and whether KHC might yet offer a welcome home for some or all of Unilever's Foods assets."

To take note of, reports over the weekend also indicated that Heinz´s bid may have been leaked to the press sooner than the American company may have wished for.

As well, analysts at Berenberg reportedly said the initial offer from Heinz was too low.

For its part, housebuilder Bovis Homes reported a 3% drop in pre-tax profit on Monday as the company was forced to compensate customers for poorly built homes, and said it had begun a strategic review.

The announcement prompted ShoreCap´s Robin Hardy to say: "Some of the risk must drop out of the valuation and any new fair value would not be that much lower but it does become harder to see fair value above 700p. Is there still a chance of take over? This statement suggests a business with more problems than were anticipated so the attraction of this business has reduced, in our view.

"We have a HOLD recommendation at present but have always been at the ‘soft’ end of this and nervous on the valuation and we see a reasonable chance that we may have to re-assess this position."

Gains for telecoms giant BT Group and Rolls Royce saw their respective sectors top the leaderboard amid lacklustre trading conditions given that US markets were closed in observance of Presidents Day.

Shares in the former appeared continued to bounce back following the late-January news of accounting blounders at its Italian arm which saw the stock crash.

Stock in BT was likely also being pulled higher towards the 330p price level, which marked the intra-day high reached on 24 January, the same day the above news broke, that marked a level of technical resistance.

In parallel, shares of Rolls Royce gained altitude after Goldman Sachs upgraded its recommendation on the shares from 'neutral' to 'buy'.

Goldman also lifted its target price for Rolls from 743.0p to 1,030p as it added the company´s shares to its 'Conviction' list.

The company has the potential to substantially increase free cash flow between now and 2020, the investment bank told clients in a research note.

Nonetheless, the shares had yet to break convincingly above their 200-day moving average.

Top performing sectors so far today
Fixed Line Telecommunications 3,695.10 +1.90%
Aerospace and Defence 4,640.18 +1.79%
Life Insurance 8,077.15 +1.25%
Real Estate Investment Trusts 2,925.75 +0.94%
Insurance (non-life) 2,802.33 +0.93%

Bottom performing sectors so far today
Personal Goods 31,319.88 -6.26%
Household Goods & Home Construction 16,840.39 -1.06%
Food Producers & Processors 7,787.30 -0.86%
Health Care Equipment & Services 7,357.91 -0.80%
Tobacco 56,549.52 -0.71%