Analysts unconvinced by JM takeover rumours

16 October 2007 11:55  [Source: ICIS news]

LONDON (ICIS news)--Analysts on Tuesday said a bid for Johnson Matthey (JM) by Praxair was unlikely, as takeover speculation in the international media fuelled a 10% jump in the company's shares.

 

Citigroup said the niche nature of JM’s businesses limited potential synergies for predators, despite the company offering strong positions in growing markets such as autocatalysts.

 

JM and Praxair “do not compete in any major area, the only link is that Praxair may buy catalysts from JM for its hydrogen production,” it said in a research note to investors.

 

“Praxair has not suggested major acquisitions are part of its strategy and its management has hitherto been focused on raising, not lowering, its return on capital employed (ROCE),” added Citigroup.

 

Johnson Matthey shares surged £1.66 or 9.9% to £18.40 on the London Stock Exchange on Monday, the biggest percentage increase since February 2000, amid media speculation that Praxair was weighing up a bid worth £4.2bn ($8.5bn/€6bn) for JM.

 

Officials at both JM and Praxair were not immediately available to comment on the media reports.

 

A Charles Stanley report echoed Citigroup, with analyst Jeremy Batstone-Carr unconvinced by the potential overlap between Praxair and JM.

 

“In the context of relatively muted earnings growth this year, we believe that the shares are now fully valued,” said Charles Stanley, which lowered its recommendation on JM shares to Hold from Buy in the wake of bid rumours.

 

Citigroup maintained a Buy recommendation on JM shares and a price target of £19.

 

JM shares dropped back nearly 4% during trading at £17.72 (11:20 local time).

 

M&A speculation in the chemicals market has been rife in the chemicals market during the last week, stoked by speculation that major player Dow Chemical was preparing a large bid after it postponed its November investor meeting.

 

($1 = €0.70)

($1 = £0.49)

By: Mark Watts
+44 20 8652 3214

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