Bid news and speculation finally pushed the FTSE 100 briefly through the 5,000 level during trading on Wednesday for the first time since June 2002 but traders were concerned the optimism would be shortlived.
The benchmark index retreated from its early afternoon breakthrough to finish 0.1 per cent lower at 4,990.4 after touching an intra-day high of 5003. The FTSE 250 index eased 0.2 per cent to 7,347.5. Volume was average with 3bn shares changing hands.
Soft earnings results from US technology group Cisco and concern about the performance of US retailers in the upcoming earnings season led traders to turn cautious on the UK market. The FTSE 100 was also held back by falls in index heavyweights going ex-dividend. The mid-caps remained in the thrall of bid speculation in the wake of Baugur's 190p per share approach for Somerfield, the UK supermarket chain. S
Somerfield rose 13.9 per cent to 184.5p with most expecting the Icelandic group Baugur to prevail. However, there was some murmurings of a counterbid pushing Somerfield to 200p per share. See more on Somerfield
JJB Sports added 4.1 per cent to 220.5p on renewed rumours that it was top of the target list for venture capital groups. The story is not new and JJB was approached with an offer last October that it rebuffed.
Traders speculated a deal could partly depend on the performance of JJB chairman Dave Whelan's beloved Wigan Athletic football team. It is currently in contention for promotion to the Premiership and traders gossiped that if promoted, he would like funds to help strengthen the team.
Woolworths rose 2.1 per cent to 49p after the retailer rejected a 50p-55p per share offer from Apax Partners, the private equity firm, valuing the company at up to £789m. See more on Woolworths
“Woolworths must be very confident to turn down 50p-55p from Apax so quickly, but the story isn’t over” said Nick Bubb of Evolution Securities: “This opens it up for another private equity player or trade buyer to make a bid of 55p-60p and the initial rejection in fact may just be a negotiating tactic from Woolworths to open up the bidding. The management do not seem averse to a deal at ‘the right price’, the stock is still in play and we still expect an exit at 60p.”
ITV rose 2.5 per cent to 125p on hopes the television broadcaster would benefit from comments from the regulator OFCOM, which said commercially-funded public service broadcasting (PSB) would not survive into a digital world.
Credit Suisse First Boston estimated ITV could save £75m -£100m while still maintaining some PSB commitments, most notably news broadcasting.
Yell, the directories group rose 2.3 per cent to 469.25p after Goldman Sachs said a favourable outcome to the UK regulatory review this year could add 45p to the shares.
Scottish & Newcastle lost 0.1 per cent to 455.5p after Dresdner Kleinwort Wasserstein played down the likelihood of a bid for the brewer. Major European players like InBev, Heineken and Carlsberg would face competition issues, it said, while it doubted SABMiller or Anheuser-Busch would want to dilute their growth rates.
Takeover speculation continued to swing the share price of Avis Europe, up 7.5 per cent to 60.75p. The car rental firm leapt on recent speculation that South African industrial group Barloworld or Belgian car seller D'Ieteren, could buy out the company before falling as the rumour was denied.
However, traders gossiped that US venture capital group Cendant was eyeing Avis Europe as part of a plan merge the group with recently acquired ebookers, the online travel site. Cendant already owns the Avis and Budget brands rights through its ownership of Avis Inc, of the US.
Lastminute, the online leisure group, added 2.6 per cent to 106.75p as investors made some late bets that Thursday's results would be better-than-expected. Traders were also encouraged by news that one large investor, trading through Morgan Stanley and thought to be a hedge fund, had cleared out of the shares, reducing an stock overhang.
Several FTSE 100 constituents fell after their shares went ex-dividend. Shell, the oil major, was the most noticeable, falling 3 per cent to 472.25p.
Reinsurance stocks were generally lower after bearish comments from Morgan Stanley on Benfield and Jardine Lloyd Thompson. For Benfield, the world's fourth-largest reinsurance broker, the broker cut its rating to “equalweight” from “overweight”.
Analyst Chris Hartwell said: “As the insurance and reinsurance markets soften, we think the brokers collectively will face immediate headwinds from declining commissions.” Benfield fell 0.9 per cent to 294.75p.
Morgan Stanley also initiated coverage of Jardine Lloyd Thompson with an “underweight” rating. Morgan said Jardine's had not adequately disclosed the nature of the operating problems that led to a profit warning in November and expressed concern at the timing of expansion into reinsurance and US retail lines. Jardine shares finished unchanged at 387p.
Among the smaller companies, market talk suggested Matrix Communications Group, the IT network supplier could shortly announce the acquisition of Equip Technology, a specialist IT distributor of security solutions. Equip’s customers include BT, Bloomberg, Morse, Computacenter and Dimension Data. The deal is expected to cost around £10m and to be earnings enhancing. Matrix ended 1.6 per cent lower at 214p.
Stanelco rose 24 per cent to 14p after it raised £4.8m via a placing of 38m shares at 12.875p, conducted by KBC Peel Hunt. Stanelco has adapted its radio frequency technolgy to sealing food trays and the company said it had funds will be used for existing development projects.
Lorien rose 28.3 per cent to 72.5p after the the IT resourcing and specialist services group said it had received a preliminary approach that may or may not lead to a takeover offer for the company.
A positive update from its gold exploration in Ireland helped Conroy Diamonds and Gold gain 44.4 per cent to 4p.
Speedy Hire was unchanged at 691p after the tool rental specialist announced two small deals. Speedy bought D.A.D. Hire services, a tool hire business based in the North West for £0.3m and sold a non-core division, Toilet Hire for £1.1m to a management team backed by the Bank of Scotland. Graham Neale of Killick Co initiated coverage with a “buy” recommendation and a target price of 765p.
Arena Leisure rose 12.8 per cent to 41.75p on talk the racecourse operator could move into greyhound racing by buying six tracks from the troubled gambling group Wembley, off 0.1 per cent at 807p.
Ennstone ticked up 1.7 per cent to 44.5p on vague talk the aggregates group could be the next takeover target in the sector, following Holcim’s bid for Aggregate Industries and Cemex’s acquisition of RMC.
DAT added 7.5 per cent to 350½p on talk the mobile software specialist would follow up its venture with Dangaard Telecom to market an email product for mobile phones by announcing a similar venture with a US group.
A positive trading update and contract wins worth £3.7m helped Delling gain 23.4 per cent to 19.75p. The marketing support services group also raised £1.3m via a placing of 8.7m shares at 15p per share, conducted by Seymour Pierce. The funds will be used to fund potential acquisitions.
Fallkland Islands Holdings fell 10.5 per cent to 532.5p following news that a pair of directors sold 600,000 shares at 450p (7 per cent of the company) via a placing conducted by KBC Peel Hunt on Tuesday.
Innovation Group, the insurance software specialist, gained 6.3 per cent to 42.5p as it emerged financial services group Cantor Fitzgerald held a 19.4 per cent stake in the company. Cantor typically buys such stakes on behalf of clients holding contracts for difference. It can be a sign of stake building.
Deal Group Media firmed 2.3 per cent to 22.5p despite news that the Eureka Interactive hedge fund managed by Marshall Wace has reduced its stake in the online marketing group below the 3 per cent notifiable level. It previously held a 3.8 per cent stake.
Bid news and speculation finally pushed the FTSE 100 briefly through the 5,000 level yesterday for the first time since June 2002 but traders were concerned the optimism would be shortlived.