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Financial Times: Buy-outs speed up shrinkage of LSE

By Stacy-Marie Ishmael
Published: May 30 2007 03:00 | Last updated: May 30 2007 03:00

The shrinkage of the London stock market is accelerating, driven by frenetic takeover activity and continuing corporate share buy-backs, according to a survey.

Shares worth net $60bn (£30.3bn) have either been bought by acquirors or corporates themselves since January, equivalent to 1.4 per cent of the market’s overall capitalisation, data from TrimTabs Investment Research shows. The level would have been higher but for a continued flow of initial public offerings.

Most of the shrinkage came from cash-funded takeovers. Deals announced in London since the beginning of April surged to $54bn – almost equal to the value of all deals recorded in the last two quarters of 2006. Trim- Tabs said private equity groups were involved in half of these deals.

Some of the shrinkage is also attributable to corporate share buy-backs. BT Group, BP and Royal Dutch Shell have all announced big buy-backs so far this year. Stock buy-backs reached $520m daily this past week, the strongest pace seen since December of last year.

“Buy-backs have been pretty stable on the LSE,” Vincent Deluard, editor of TrimTabs’ weekly Global Liquidity Review, said. “But private equity buy-outs have soared. It just cannot continue. There’s only so much private equity can digest at the same time – and there are only so many listed companies left.”

Still, Mr Deluard thinks there are a few large buy-out candidates left, including Royal Dutch Shell, Rio Tinto and Friends Provident.

Copyright The Financial Times Limited 2007

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