Takeover talk adds kick to Scottish & Newcastle

Scottish & Newcastle provided the entertainment Thursday as the London market bounced back from losses in the previous session.

Shares in the brewer of Kronenbourg and Newcastle Brown Ale surged 12 per cent to 595p in heavy volume amid rumours of an imminent 700p-a-share takeover approach.

The speculation initially centred on talk of a bid from Heineken. However, that was quickly dismissed by analysts on the grounds that a deal would be blocked by regulators.

The speculation then focused on talk of a break-up bid involving Danish brewer Carlsberg. Sector watchers said the rumours were plausible as Carlsberg is keen to take control of Baltic Beverage Holdings, the Russian brewer it owns with S&N.

Housebuilder Taylor Woodrow provided one of the day’s other speculative features. Its shares advanced 4.5 per cent to 486p on rumours that its nil-premium merger with George Wimpey, up 2.3 per cent to 640p, would be scuppered by a counterbid. Once again, the name in the frame was Persimmon, up 1.4 per cent to £14.21.

There was also a buzz around Man Group. Shares in the hedge fund manager jumped 4 per cent to 465p on rumours that it would announce the demerger of brokerage arm Man Financial with Friday’s trading update.

In the wider market, leading shares recouped all and more of Wednesday’s losses.

The FTSE 100 closed 57 points, or 0.9 per cent, higher at 6,342.2, lifted by a firm opening on Wall Street and strength in the heavyweight oil sector.

A further sharp rise in the crude price saw BP gain 1.1 per cent to 558p and Royal Dutch Shell move up 0.7 per cent to £17.06.

Mining stocks were also in demand. Lifted by rising metal prices, particularly copper, Anglo American rose 2.7 per cent to £26.73, while Antofagasta added 2.7 per cent to 510¾p and Lonmin gained 2.2 per cent to £33.11.

Lower down the market, the FTSE 250 rose 83 points, or 0.7 per cent, to 11,665.7.

Tate & Lyle rose 5.3 per cent to 573½p on relief that its trading update contained no nasty surprises, as well as news the sugar company was making progress on the sale of its Food & Industrial Ingredients business.

Traders reckon the sale could pave the way for a share buy-back. Tate & Lyle has a strong balance sheet with gearing at its lowest level for a decade. If the company does not releverage, it could be a takeover target for private equity.

Elsewhere, Compass Group advanced 4.9 per cent to 335¾p after the contract caterer issued a trading update that contained good news on margins and stronger-than-expected organic growth. Analysts said the statement showed Richard Cousins, the company’s new chief executive, was getting to grips with the business.

On the downside, Next fell 4.7 per cent to £22.41 after Simon Wolfson, the company’s chief executive, put a dampener on recent take-over speculation by announcing the sale of shares worth nearly £3.7m.

Even before the share sale was announced Next was under pressure. This was because of a research note from Citigroup that looked at the maths of a £25-a-share leveraged buy-out and concluded it did not stack up.

Among the mid caps, Schroders added 1 per cent to £12.80 as index trackers bought stock ahead of the fund manager’s inclusion in the FTSE 100 this morning. Schroders will be taking the place of Corus, the Anglo-Dutch steel company that is being acquired by Tata Steel.

The shares were also lifted by rumours that Schroders’ institutional asset management business could be up for sale. Sector specialists said the division, which manages about £77bn of assets, would be attractive to the fund management arms of investment banks Goldman Sachs, Citigroup or JPMorgan.

A sale would leave Schroders focused on higher-margin businesses and trigger a re-rating of its shares. It would also swell the company’s cash pile, some of which could then be returned to shareholders.

In the same sector, Aberdeen Asset Management rose 4 per cent to 213¾p on further reflection of Wednesday’s strong trading update.

Countrywide, the UK’s biggest estate agent, marked time at 593p as Polygon, the activist investor, declared an increased holding of 23.4 per cent. Polygon’s intentions are unclear but traders are worried it will try and block the bid for Countrywide from Apollo, the private equity group.

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