* Tui Travel set to join FTSE 100 in December reshuffle
* Strong revenue fuelled 80 pct rally since June
* Promotion to boost demand for stock from index trackers
* Crisis-hit Pennon a likely demotion after 24 pct stock
* Direct Line to secure mid-cap status after October listing
By Francesco Canepa
LONDON, Dec 10 Shares in UK-listed tour operator
Tui Travel are set to regain blue-chip status this month
in a promotion that will stoke yet more demand for the stock
after an 80 percent rally since June.
The owner of Thomson and First Choice is expected to be
added to Britain's FTSE 100 in a reshuffle to be
announced on Wednesday, replacing struggling utilities group
The promotion to FTSE 100 status after 1-1/2 years among the
second tier "mid-caps" was expected to attract demand for around
21 million Tui shares from investors who track the UK benchmark,
according to a European investment bank.
Shares in buyout group Melrose and energy services
company John Wood Group hit all-time highs in the week
when their additions to the FTSE 100 were announced in
"Normally once the announcement is made we get a flurry of
buyers hoping to catch any move that the funds that have to
start buying create," Will Hedden, premium client manager at IG,
Tui's shares are already trading close to a 1-1/2 year peak,
propelled by strong sales of package holidays to cash-strapped
European consumers, making the firm the 92nd largest stock on
the FTSE 350 index with a market capitalisation of 3.2 billion
pounds ($5.13 billion), Thomson Reuters StarMine data showed.
By contrast, Pennon, whose recycling business has been hit
by the economic crisis, looks a strong demotion candidate after
a 24 percent share price slide in the past 3-1/2 months left it
at 119th place in the FTSE 350.
The investment bank estimated that if Pennon lost its FTSE
100 status, 34 million of its shares would be sold.
Any blue chip that falls to the 111th spot or below
automatically drops into the FTSE Midcap 250 index,
freeing up a spot for the largest company outside the FTSE 100.
Stocks outside the benchmark that grow to rank among the 90
largest by market capitalisation are automatically promoted into
the blue-chip index, although no company automatically has
qualified for direct promotion at this reshuffle.
The review uses closing prices from Dec. 11, but the changes
have to be confirmed by index compiler FTSE after the market
close on the following day. The changes will be implemented from
the start of business on Dec. 24.
The most notable addition to the FTSE Midcap 250 index was
expected to be Britain's largest motor insurer, Direct Line
, which went public in October and has yet to be
included in any FTSE index.
Direct Line shares have risen roughly 11 percent since they
were listed at 175 pence each on Oct. 11, valuing the firm
towards the bottom of the range of analysts' estimates and
triggering a string of "buy" recommendations from banks and
The rally raised the former RBS unit's market
capitalisation to 3 billion pounds, or just 6.3 percent less
than FTSE 100 hopeful Tui.
This meant Direct Line could be up for blue-chip promotion
at the next reshuffle, due in March, with miner Xstrata
marked for possible demotion once its planned merger with
commodities trader Glencore is completed.
Other candidates for promotion to the FTSE 250 in the
December reshuffle are pubs firm Enterprise Inns and
pharma group United Drug, replacing oil & gas firm
Ruspetro, Talvivara Mining Company and waste
management firm Shanks Group.