JJB Sports kicked higher on talk of Baugur

You would have expected a reasonably quiet day of trading in JJB Sports yesterday. On Wednesday came the news that David Whelan, the chairman, had abandoned his pounds 517m management buyout bid which sent the stock crashing as those betting on the successful completion of the bid bailed out en masse.

However, yesterday saw another day of brisk trade in JJB, off 1p to 185p, as more than 7 million shares changed hands. One whisper circling the City's dealing rooms late in the day suggested that Baugur, the Icelandic retailer that is currently leading a takeover of the toy store Hamleys, has been busy building up its stake in JJB.

Baugur is already understood to hold a small stake of about 0.5 per cent in the sports retailer and JJB certainly fits the Icelandic group's investment criteria. Its shares are lowly rated, they trade at about 7 times estimated earnings for the current year, while the company itself is very cash generative - analysts reckon JJB will generate more than pounds 100m of free cash flow in the next two years.

Some even suggested that Baugur may be interested in putting together a bid for JJB. If it does it will certainly need the backing of Mr Whelan and his family, who own a big chunk of the group, and some heavyweight financial backing. Analysts on the whole argued that if Baugur has been building a stake, it is most likely to be purely as an investment.

Meanwhile, market professionals also reported talk that the Icelandic retailer has been actively buying into Safeway, up 1.5p to 258p.

Conflicting stories surrounded Bradford & Bingley, up 1p to 338p, ahead of today's trading statement from the bank. Some whispered that the update would contain a profit warning while others said that all is going to plan at B&B. In the FTSE 100, Granada was the best performer, rising 2.25p to 87.5p, as Deutsche Bank added the ITV broadcaster to its European Focus List. The list consists of Deutsche's favourite 15 stock picks in Europe. The German broker believes the ITV licence fees paid by Granada are likely to fall going forward, which would be great news for the group's cost base. It also told clients that the planned merger with its ITV rival Carlton Communications, down 0.25p to 142.75p, is more likely to go ahead than not.

Rio Tinto gave up 21p to 1,154p after Coal & Allied, the Australian coal producer that is 75 per cent owned by Rio Tinto, issued a profit warning. C&A cautioned that it would only break even for the first half of the year as it complained of a sharp deterioration in market conditions for Australian coal exporters. For the full year, analysts forecast the group will generate just $14m (pounds 8m) of earnings for Rio Tinto, compared with $68m in 2002.

Lastminute.com jumped 11.75p to 166.5p amid heavy demand for the stock from American institutions. The group's management is known to have been on an investor road show of the US recently. Its rival Ebookers, up 2.5p to 427.5p, was downgraded by Numis Securities. The broker cut its rating for the online travel company to "hold" from "buy" after the stock went through its 425p target price. Meanwhile, whispers of a bid surrounded the sector minnow Online Travel, steady at 23.25p.

Luminar, which has outperformed the wider market by 40 per cent over the past three months, continued with its strong performance as it rose 5p to 465p. Those hoping that a much rumoured management buyout will finally happen may be disappointed, however. In a presentation to Altium Capital earlier in the week, Luminar's boss, Steve Thomas, confirmed that he has been frequently approach by private-equity firms looking to back a buyout and that he had knocked them back each time. Mr Thomas told Altium he will continue with this policy in the future.

London Scottish Bank added 4p to 129p on talk that the group is trading ahead of forecasts. WH Smith held steady at 353p as one brokerage that had recently visited the company was heard telling clients that news of an exit by the group from its US hotels business is very likely before the end of the group's financial year in August. Meanwhile, analysts at Investec Securities returned from a meeting with the management team at DFS Furniture, unchanged at 402.5p, and reported that the group was trading strongly.

Teather & Greenwood carried out a dawn raid on IDS, up 1.25p to 23p, on behalf of a consortium led by the software group's chief executive, Jim Meinen, and backed by Schroder Ventures. The 23p-a-share offer values IDS at pounds 13m and trumps a 19p-a-share bid from Capital Stream Minnesota, a US-based software house. Sector Guard ticked 0.25p higher to 3p as investors applauded a 219 per cent jump in pre-tax profits at the AIM- listed security group. Sales grew by an impressive 52 per cent.

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