Smith & Nephew was the talking point on renewed speculation that it was a US bid target.
The medical devices maker surged in mid-afternoon trading on Friday on a website report that Stryker had tabled a takeover offer valued at around $18bn. Neither company responded to the StreetInsider report, which investors nevertheless viewed as credible.
S&N closed up 4.5 per cent at £11.72, giving it a market value of $15.7bn.
Stryker last year admitted an interest in buying S&N, only to change tack in March by setting up a $2bn share buyback fund. However, more than two years have passed since Stryker’s last major acquisition and the US group ended the third quarter with $3.4bn of cash on its relatively unfeared balance sheet, which makes S&N a plausible target again, said analysts.
“An acquisition of S&N by Stryker would not surprise us as the combination should generate hundreds of millions in expense synergies over the next several years,” Sterne Agee told clients.
The year’s last monthly expiry of options contracts made for a volatile wider market. The FTSE 100 fell 0.8 per cent, off 50.12 points at 6,052.42.
BG dropped 4 per cent to 908p in an untidy closing auction. Traders blamed frayed nerves ahead of shareholder votes on its planned takeover by Royal Dutch Shell, up 0.6 per cent to £14.69.
Next slipped 1.8 per cent to £72.75, with Exane BNP Paribas repeating an “underperform” rating in its Christmas quarter trading preview. Warm weather means Next’s retail same-store sales will drop 2 per cent, it forecast.
“Longer term we harbour doubts that Next can return to the double-digit earnings profile that has supported its premium valuation to the sector,” said Exane. “We see a decline in profitable credit customers as structural headwind to earnings growth.”
Short covering and end-of-year position squaring lifted the mining sector. Anglo American, the FTSE 100’s year-to-date worst performer, bounced 5.7 per cent to 278.7p.
BHP Billiton gained 2.5 per cent to 717.2p, with UBS repeating “buy” advice. UBS forecast that BHP would cut its 2016 dividend by 50 per cent, but still saw the stock as a high quality, good value option on copper and oil prices recovering.
Carnival hit a record high, up 2.6 per cent to £36.48, after the cruise operator said stronger booking trends had allowed it to edge prices higher.
Bodycote gained 1.9 per cent to 550p after N+1 Singer turned positive on the engineer. Sentiment should improve progressively in 2016 as comparison periods get easier from the second quarter onwards, and the shares are at a sector discount based on low expectations, it said.
Restaurant Group gained 3 per cent to 675p after UBS started coverage of the Chiquito owner with an 860p target. Using population density data, UBS estimated that Restaurant’s key brands could open in more than 1,000 additional locations, four times management’s long-term target.