Wednesday newspaper share tips: LSE, Ashtead

There is a high probability that Deutsche Boerse’s rivals will try and crash its proposed tie-up with the London Stock Exchange, the Financial Times’s Lex column said.

On 1 March, ICE already said it would do just that and the industrial logic between the two deals was similarly “attractive”, Lex argued.

Hence, in the end it would all boil down to two questions, price and deal structure.

A combination between the LSE and ICE would combine two big clearing houses, offering savings to both owners and users, the investment column said.

LSE shareholders would gain exposure to Liffe and it would bring together two major stock markets too, Lex added.

However, there could be no pretence that it was a merger of equals, it would be a full-blown take-over.

ICE’s market capitalisation was twice that of its target and its earnings before interest, taxes, depreciation and amortisation almost three times higher.

If structured along similar lines to ICE’s purchase of NYSE Euronext then that could see the US outfit shell out a 37% premium over LSE’s undisturbed share price, or £31.70.

It might also opt to structure the deal as a tax inversion.

Nonetheless, ICE's offer might in turn itself be trumped by bids from the likes of CME Group, Hong Kong Exchanges and Clearing or by a sweetened bid out of Deutsche Boerse, Lex concluded.

Stock in Ashtead has come off sharply since their December highs, a third of that just yesterday following its third quarter numbers.

Yet unless one is “very gloomy” on the US economy and its non-residential construction sector, from which the company extracts the majority of its profits, then that is hard to justify, The Times’s Tempus said.

The company’s decision to slash its budget for capital expenditures appears to have been the immediate trigger for the share price fall.

However, in reality the bulk of the reduced spend can be accounted for by the end of London-based Ashtead programme to replace old equipment.

Lower capital spending would also boost cash flow and the market expected a “hefty” dividend increase at the end of 2016, Tempus added.

True, revenue growth slowed down to 14% in the third quarter, but it was still seen by the company expanding by between 10% to 15% in the next financial year.

The share price fall was “well overdone”, “buy” said Tempus.