Investors see Mixed Fortunes With Carillion and Gem Diamonds

Monday, January 15: GKN was up again following the announced takeover offer on Friday amid speculation that Melrose Industries is to boost its £4.05 bid, which GKN initially rejected. GKN was 4.15% higher, but the main story to hit the wires was the compulsory liquidation of Carillion. The FTSE 100 closed out the day lower by -0.12% as health stocks NMC Health and Shire weighed on the primary index, despite GKN providing further lift.
Shares in the company were suspended this morning following the announcement, after crisis talks with creditors and the government over the weekend proved to be unsuccessful. It is rumoured that £300m was required in order to support the business plan, but banks deemed the lending too high risk which led to last ditch discussion with large creditors and the government. This arose as many contracts have since developed to be loss-making, and in the aftermath of three profit warnings there is debate as to why £1.7bn worth of government contracts were awarded to a firm clearly in financial difficulty.
Galliford Try was the largest faller on main indices, slipping 6.98% after disclosing exposure to Carillion. It, alongside Balfour Beatty will have to make up an estimated £60-80m funding shortfall for a joint-venture road project due to the liquidation of Carillion. Galliford is in a joint venture with Balfour Beatty and Carillion on the £550m Aberdeen western peripheral route contract. Balfour Beatty also announced an exposure of £35-45m.
Gem Diamonds posted gains of 8.19% after announcing it recovered the fifth largest gem quality stone ever recovered from its Letsing mine in Lesotho, its largest find at the site to date. The 910-carat diamond is estimated to be worth $40m, and is expected to greatly enhance the balance sheet strength of the business according to analysts.
Across Europe, indices were lower at the close with the FTSE 100 -0.12%, the DAX 30 -0.34% and the CAC 40 -0.13%.

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