Investors show healthy appetite for Tate & Lyle

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The Independent Online

Unusually strong demand for Tate & Lyle stock yesterday left shares in the sugar and starch producer up 9.25p to 303.5p and set tongues wagging about why investors have suddenly developed such an appetite for the group.

Unusually strong demand for Tate & Lyle stock yesterday left shares in the sugar and starch producer up 9.25p to 303.5p and set tongues wagging about why investors have suddenly developed such an appetite for the group.

Bid talk has circled the company of late after a profit warning in January sent its shares plummeting to 12-month lows. Analysts on the whole poured cold water on talk of a bid for T&L and noted that any deal would require the backing of the US food company Archer Daniels and the French group CIP, which together control 25 per cent of T&L.

This rise in the dollar is a more likely explanation for the stock's jump yesterday, they argued. T&L has significant exposure to the American currency and news that the greenback is rallying is very good news for the group. Others suggested that government plans to create REITs - real estate investment trusts - could greatly benefit a property-rich company such as T&L. "REITs could potentially allow T&L to realise the bulk of the value from its property portfolio in a very tax efficient way," argued one market professional.

In the FTSE 100 index, BAE Systems put on 4.5p to 205p in reaction to the rise in the US currency. Like T&L, the defence and aerospace group generates a large proportion of its earnings in dollars. Meanwhile, the dollar rise is bad news for commodities prices and in turn bad news for mining stocks. BHP Billiton gave up 20.5p to 505.75p, Rio Tinto retreated 45p to 1,445p and Anglo American dropped 37p to 1,383p.

Dresdner Kleinwort Wasserstein unsettled sentiment towards Dixons, down 3.75p to 155.5p, as the German broker downgraded its recommendation on the retailer to "reduce" from "hold". "After a strong share price recovery, we believe investors should take profits and switch into rival GUS, which looks better value," said Dresdner. Dixons shares have doubled from last year's lows but the broker is worried that growth remains sluggish in the electricals market and will hold the stock back.

Smith & Nephew improved 7.25p to 530p as Sir Chris O'Donnell, the chief executive of the medical devices group, made a number of well-received presentations to institutional investors in the Square Mile. Yule Catto dropped 7p to 255p before today's full-year results from the speciality chemicals group. In December, Yule Catto disappointed the market with a particularly gloomy outlook message for 2004, causing analysts to cut their profit forecasts by between 20 and 30 per cent. Credit Suisse First Boston expects a pre-tax profit of £60m from the group on sales of about £540m.

Stagecoach lost 2.25p to 82.25p as ABN Amro called a halt to the transport company's recent strong run. The Dutch broker believes investors are overstating the value of Stagecoach's 49 per cent holding in Virgin Rail. ABN cut its rating on the stock to "reduce" from "hold".

Online Travel soared 4.75p to 28.25p on news of an all-share bid from its rival lastminute.com, down 8p to 227p. Gossips reckon a counter bid for Online is on the way from the US and could spark a takeover battle for the group. Medisys dropped 2p to 10.75p after the company's Hypoguard diagnostics division was named as one of four defendants in a patent infringement complaint from Roche Diagnostics.

Lidco jumped 3.75p to 35.25p on talk the group is close to sealing a Europe-wide distribution deal for its cardiovascular monitor. There were also suggestions that orders for the monitor are flowing in thick and fast from Japan and the US, where distribution deals are in place. Meanwhile, market professionals talked of a fund raising at Bioprogress, 2.5p lower at 137.5p. According to dealing room gossip, the group is putting the finishing touches to a placing of new stock at 100p, which could be announced as early as next week.

Harrier Group, where the serial entrepreneur Bob Morton has a 29 per cent stake, boasted of a return to the black in its annual results statement. With a net profit of £200,000, the group is more profitable now than three years ago when it was valued at more than £200m. Yesterday its shares dropped 0.25p to 33p, valuing Harrier at about £10m. Word has it the group is looking to complete an acquisition in the next six months, which could potentially double its size.

Avesco, the company behind the hit TV series Who Wants to be a Millionaire?, gained 0.5p to 67.5p. Earlier this week, Ian Martin, the chairman, bought 50,000 shares at 68p. Yesterday, it was incorrectly reported in this column that he had sold that quantity of stock.

Telecom Plus gave up 13 to 355p as it emerged that the investment supremo Nigel Wray had halved his stake in the group to 2.3 per cent. Brokers pointed to recent director share buying at Advanced Power Components as the reason for a 2p rise in its share price to 17p yesterday.

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