M&B and Bellway buck weak London trend

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Housebuilder Bellway and Mitchells & Butlers, the pub and restaurant operator, were in focus late Friday.

Both stocks managed to buck the weak market trend. Bellway shares firmed 0.2 per cent to 978p after Instow Limited declared a 3.5 per cent interest.

Sources close to Bellway said Instow was a company controlled by Delta Three, an investment fund run by financier Paul Taylor and backed by the State of Qatar.

Delta Two, another vehicle run by Mr Taylor, recently abandoned a 600p a share bid for J Sainsbury, off 1.5 per cent at 427½p.

Bellway has been touted as a takeover target for several of its larger peers.

M&B shares jumped 4.8 per cent to 660p on talk that it was working on a deal that would see the group split into an operating company and property company, with a large chunk of cash returned to shareholders.

In the wider market, leading shares closed sharply lower after a weak opening on Wall Street. The FTSE 100 finished 77 points, or 1.2 per cent, lower at 6,304.9, taking its losses over the week to 225 points, or 3.5 per cent.

The FTSE 250 dropped 172.9 points, or 1.6 per cent, to 10,859.1. The mid cap index lost 583 points, or 5 per cent, on the week.

Friends Provident, the life assurer, was among the biggest fallers. Its shares dropped 7.2 per cent to a three-year low of 148.7p as hedge funds started selling short ahead of the redemption of a £290m convertible bond issue next month.

Under the terms of the bond, the gap between the 171p conversion price and the market price will be made up by a cash top-up. In turn, the market price will be determined by the average closing price of FP shares over 30 days from October 25 to December 5.

Hedge funds keen to get more cash have been shorting the stock in an effort to drive down the average market price.

Standard Life was also under pressure. Its shares slipped 3.9 per cent to 243¾p – just 13¾p above last summer’s flotation price. Traders pointed out that the value of its cash and shares offer for Resolution, off 0.6 per cent to 723p, now stood at 691p. Hugh Osmond Pearl Group in contrast is offering 720p a share in cash.

Banking stocks remained under pressure. Rumours, later denied, of a £10bn write off saw Barclays trade as low as 442p. It shares finished 2.4 per cent lower at 474½p.

Royal Bank of Scotland fell 3 per cent to 402¾p and HSBC eased 1.4 per cent to 840½p after two related structured investment vehicles – Asscher Finance and Cullinan Finance – were placed under review for possible downgrade by Moody’s.

On the upside, Rio Tinto gained 6.2 per cent to £56.24 as traders bet that BHP Billiton, down 1.7 per cent to £16.28, would return with a higher offer. UBS said it was unlikely that the board of Rio would recommend any offer below £62 a share.

British Energy, up 2 per cent to 521½p, also bucked the weak market after Goldman Sachs added it to its Conviction Buy List.

“With bleak output scenarios reflected in the share price, the absence of additional news should allow a strong oil price to support the shares. We continue to believe that British Energy will pay a special dividend next February,” it said.

Among mid caps, Halfords, the cycle and car parts retailer, rallied 4 per cent to 337½p, surprising traders who think the chances of a bid from Japan’s Autobacs Seven are receding.

They pointed to news that Silchester, a UK hedge fund, was trying block plans by Autobacs to raise £275m through a convertible bond issue to fund acquisitions.

Rank, the casino and bingo club operator, advanced 7.5 per cent to 90p on further stake building rumours. There was also talk of a break-up bid.

Misys, the software developer, fell 6 per cent to 223p after UBS advised clients to “sell”, citing valuation and concerns over a slowdown in its treasury capital markets business.

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