Last updated: December 13, 2011 8:03 pm

Aggregates maker CRH lifted by consolidation prospect

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The potential merger of CRH ’s two biggest competitors helped put it among the risers yesterday as the London market rebounded.

The Irish aggregates maker, which last week won promotion to the FTSE 100, rose in the wake of Monday’s hostile offer for Vulcan Materials from US peer Martin Marietta.

“Marietta management would not be taking such a significant step without having a good degree of confidence that its end markets had at worst stabilised,” said Liberum Capital.

Analysts also noted a price tag including debt of $7.4bn – equivalent to about 25 times Vulcan’s operating earnings, compared with CRH, which trades at roughly 8 times earnings. The high price meant CRH was very unlikely to counterbid, but would be likely to pick up disposals required by the enlarged group, they said.

“The elevated valuations at which US peers trade could again raise the issue of whether or not CRH should contemplate splitting its US operations and listing them separately,” NCB Stockbrokers said. CRH has traditionally opposed such a split.

CRH rose 2.5 per cent to £11.54 ahead of its addition to the FTSE 100 on Monday.

Oil stocks lifted the wider market as gossip of Federal Reserve stimulus efforts triggered a rise for crude.

The FTSE 100 was up 62.29 points or 1.2 per cent at 5,490.15. BG Group took on 3.2 per cent to £13.67, Tullow Oil rose 3.1 per cent to £13.69 and Royal Dutch Shell ’s B shares were firmer by 2.7 per cent at £23.88.

Petrofac , the oilfield engineer, rose 5.1 per cent to £14.43 after raising its 2011 profit guidance to match consensus expectations.

Miners also found support, with Vedanta Resources 3.4 per cent higher at £11.01 and Rio Tinto rising 2.1 per cent to £31.85. An arbitrator said Ivanhoe Mines, Rio’s partner in Mongolia, could not stop Rio taking majority control of the project.

But Talvivaara , the Finnish nickel producer, slid 4.4 per cent to 219¾p after Goldman Sachs began coverage with a “sell” rating. “The near-term risks for the company are skewed to the downside, given the production difficulties faced in the ramp-up so far and our forecast of a weakening nickel market in 2012,” it said.

Aquarius Platinum ended 0.1 per cent weaker at 160p after Zimbabwe’s empowerment minister was reported to have said that 10 per cent of Mimosa, Aquarius’s joint venture, would be transferred to the local community. Zimbabwe has been in talks with miners since March over a target of repatriating 51 per cent of its mining assets.

G4S rose 1.6 per cent to 253½p and Serco was up 1.3 per cent to 471½p after they won a UK Borders Agency contract to provide support services to asylum seekers.

International Power edged 0.6 per cent higher to 326¼p amid speculation it may lift earnings guidance at pre-close meetings next week to reflect high power prices in Texas.

Leading the blue-chip fallers, Whitbread dropped 3.9 per cent to £15.14 after reporting slowing sales growth. “It looks to us like consensus forecasts for 2013 will likely retreat if current revenue trends continue,” said Merrill Lynch.

Domino Printing Sciences rebounded by 15.6 per cent to 504½p after the industrial printer raised its dividend and said demand remained in line with expectations. The shares had dropped 11 per cent on Monday amid concerns about the strength of demand from original equipment manufacturers.

Results by graphics chip designer Imagination Technologies beat forecasts thanks to licence sales, lifting the shares by 14.1 per cent to 498½p. Carpetright ’s first-half results also reassured, triggering an 8 per cent rally to 427p.

Invensys gained 1 per cent to 200¾p even after Sudipta Bhattacharya, head of its IOM automation division since 2009, said he was leaving the company. “Given the already lagging performance of IOM in terms of growth, margins and cash flow compared to peers, change is probably a good thing,” said UBS.

Among small caps, Rockhopper Exploration rose 11.5 per cent to 268½p and Desire Petroleum added 2 per cent to 25p after both Falklands explorers said drilling had revealed multiple reservoir targets.

Cove Energy was up 9.3 per cent to 102¾p on news it had opened a data room to potential bidders for its offshore Mozambique gas field.

Debt-stressed accountancy group RSM Tenon lost 32.8 per cent to 9.4p after warning of erratic trading.

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