The market has become broadly optimistic on Brexit, if the pound is anything to go by. Yesterday, the UK currency hit a five-month high at $1.30 relative to the US dollar, although some of those gains slipped following the decision by the Speaker of the House of Commons to not allow the government to hold a yes-or-no vote on Prime Minister Boris Johnson’s Brexit deal.
This evening, UK lawmakers will have a ‘second reading’ vote on the deal – this is simply to show whether the House supports the wording of the Withdrawal Deal. Given the short space of time given to MPs to read and vote on the bill, expect amendments to derail the process tonight.
Regardless, it now appears that a no-deal Brexit may have been postponed for at least a few months, as the Prime Minister formally (and begrudgingly) requested that the EU delay Brexit. Although they are under no obligation to do so, a no-deal scenario is in nobody’s interest, so it is thought that the extension will be granted.
Just Eat
The big story in individual stocks today concerned shareholders of food delivery company Just Eat (LSE: JE). The stock is up more than 24% today on news that Prosus, a spinoff of tech investment giant Naspers, has tabled a 710p per share counter-offer for the company. This offer represents a 20% premium to the one that Just Eat received from Takeaway.com, a Dutch delivery company.
It should be noted that Just Eat’s board has not reached a formal agreement (they rejected the offer, saying that it undervalues the business); the announcement was made by Prosus to allow all shareholders to consider the takeover bid.
Shares of Just Eat are currently trading at 733p a share, suggesting that the market anticipates that a higher offer may be forthcoming. It remains to be seen whether shareholders are as happy to haggle for a better offer as management is – they may prefer to take the money that is being offered.
Reckitt Benckiser
Consumer goods giant Reckitt Benckiser (LSE: RB) cut its full-year guidance for the second time this year, causing shares to sell off more than 5% at market open. Although the stock has mostly recovered from its morning slump, this cut does raise questions about the state of the UK retail environment.
The company, which owns hygiene brands like Dettol and Durex, cut both sales and profit targets, dropping sales from a 2%–3% growth estimate to 0–2%, and forecasting a “modest decline” in operating margins. Shares of Reckitt Benckiser are currently trading at 5,850p.
One of the reasons for the revised estimates cited by management was a light flu season in the US, where it sells its Mucinex brand. While this is probably true, it doesn’t explain why the company was not able to manage this falling demand to bring shareholders in for a softer landing. That is what consumer goods companies are supposed to be good at.
