Daily market update: SK Hynix, ITV, EasyJet and Ocado

The UK market was alive with M&A action among mid and large caps, with the FTSE 100 propelled by a broad range of sectors.

GSK and BAE Systems were the biggest contributors to the FTSE in terms of index points, while IAG locked into the tailwind from EasyJet’s bid update.

South Korean chipmaker SK Hynix has ridden the memory chip boom this year, with its shares up nearly 250% since the start of January. It now plans to capitalise on global investor interest with a US stock listing. The big question is whether this listing has come a little too late. Memory chip stocks have lost momentum in recent weeks, but investors might take the view that SK Hynix has solid long-term prospects rather than just being a flash in the pan.

ITV

The shackles are off for ITV. It is set to be free of its broadcasting, advertising and streaming operations and have a tight focus on production. This separation has been talked about for years, but no-one thought it was possible.

Sky is stepping in as the knight in shining armour, spying an opportunity to reach a bigger audience and strike more favourable deals with advertisers.

This looks like a win-win situation for both ITV and Sky and is the biggest shake-up of the UK’s media landscape in decades.

There are many moving parts, hence why it has taken so long to reach an agreement on the terms and conditions. ITV Studios was always the jewel in the crown in the media group, and now it’s the star of the show.

ITV’s shareholders should benefit from the separation in several ways. The company will return £950 million to investors, although it hasn’t said how this will be done. Expect a mixture of share buybacks and dividends.

ITV’s shares might trade on a higher multiple of earnings as historically the linear TV operations acted as a drag on its valuation.

A slimmed-down ITV would be an attractive takeover target for someone like Netflix looking to acquire production facilities and a rich library of content. Equally, ITV could be an acquirer itself, making bolt-on deals.

Fans of ITV shows won’t have to worry about the top shows disappearing from their screen, at least for now. It’s expected to be business as usual for the near-term. It’s inevitable that Sky will do a thorough review of programming and it’s plausible that viewers will see more repeats of shows like quizzes that have evergreen qualities.

EasyJet

Is EasyJet about to fly off into the sunset as a listed company? After a rapid song and dance, the airline’s board now seem happy at the potential takeout price.

Quite what founder Stelios Haji-Ioannou and his family think of the deal remains to be seen. Collectively, they are the biggest shareholders in EasyJet and their view matters. If they object to the deal alongside other large investors, there is still a chance the deal could fail.

The fact EasyJet’s shares are trading nowhere near the £6.90 proposal takeout price is telling. It suggests the market is still not entirely convinced the offer is good enough.

Ocado

The market is behaving oddly towards Ocado. First, the shares fell on speculation that the group would replace CEO Tim Steiner. They’ve now fallen again on confirmation that he is staying for another year or so while the board looks for a longer-term successor. He will then act as a consultant under a ‘founder’ role.

There have been rumours of heated conversations behind closed doors between large shareholders and the board. Last week there was speculation that certain shareholders were upset at chair Adam Warby seeking to replace Steiner.

Even though Steiner has struggled to keep Ocado on a sustainable growth path in recent years due to client setbacks, he is a co-founder of the business and knows it inside and out. Certain investors might have taken the view that’s a useful quality during uncertain times for the business.

Now that Steiner is staying for the near-term, the attention will turn to Warby and whether he can keep his job. Friction in the boardroom is unsustainable, and it seems unlikely that the chair can stay put after hostilities were all over the news.