April 25, 2018 / 9:23 AM / a year ago

Shire's mega deal fails to lift Britain's FTSE amid global gloom

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* Shine ready to recommend $64 bln bid

* Whitbread to spin off Costa

* FTSE 100 down 0.5 pct

* U.S. bond yields spook global markets

By Julien Ponthus

LONDON, April 25 (Reuters) - The prospect of a £64 billion bid for British drug maker Shire failed to lift the UK stock market on Wednesday as worries about rising U.S. bond yields continue to drag global markets down.

Britain’s blue chip FTSE 100 index was down 0.55 percent at 7,383.83 points by 0836 GMT while the broader European market also declined after a negative session on Wall Street and Asia.

A rise in U.S. 10-year government bond yields to 3 percent is driving fears of higher borrowing costs for corporations which have thrived in a low-interest rate environment and could encourage investors to dump shares for fixed-income securities.

Rare disease specialist Shire lost 0.5 percent after it said it was willing to recommend a sweetened $64 billion offer from Takeda Pharmaceutical.

The recent fall in its Japanese suitor’s shares make the overall offer, comprised 21.75 pounds per share in cash and 27.26 pounds in new Takeda shares, less attractive.

“Shareholders in Shire are likely to be a little concerned about getting a 50% stake in a company which has seen its share price nosedive in the last few months and which could well be worth considerably less by the time any deal is concluded”, said CMC Markets analyst Michael Hewson.

The news of the breakthrough in the talks between the two companies nevertheless lifted the pharmaceutical sector with Astrazeneca up 1.1 percent and GlaxoSmithKline up 0.6 percent.

The tobacco sector was one of the only other areas trading in positive territory with Imperial Brands up 1.7 percent and British American Tobacco rising 0.8 percent.

UBS analysts said that the latter’s guidance for products such as tobacco heating products would likely reassure the market.

The company said it plans to spend more this year on products such as e-cigarettes with a large number of launches set for the end of the third quarter. Whitbread shares got an initial boost after announcing the spin-off of Costa Coffee - a move long sought by activist investors - but then retreated and were last 1.5 percent down on the day.

Britain’s Lloyds Banking Group lost 0.7 percent after slightly missing expectations for pre-tax profits but Jefferies analysts said the earnings figures were unlikely to change the overall picture.

“We do not see consensus estimates moving either way post today’s release”, they wrote.

Lloyd also said it would not cancel its preference shares following investor complaints about the possibility after insurer Aviva AV.L abandoned its plans to scrap the high-yielding shares. (Reporting by Julien Ponthus Editing by Andrew Heavens)

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