Market Report: Aegis climbs on rumours of bid from WPP

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The Independent Online

Aegis shares have been in retreat for the past month but investors returned to the stock yesterday amid rumours of a 140p-a-share bid for the media buyer from WPP. Aegis jumped 6.75p to 127.5p as traders piled in, hoping to make a quick buck.

Any offer from WPP will be in conjunction with the private-equity group Hellman & Friedman. Sir Martin Sorrell's WPP is barred from bidding alone because of the numerous conflicts of interest in acquiring Aegis's media-buying client list. For WPP, the big prize is the company's Synovate market research business which is said to be worth £500m. Hellman & Friedman will be left with the rest of Aegis.

The Takeover Panel has told WPP it has until25 November to either make a bid for Aegis or withdraw. Should the gossips be proved right and Sir Martin does table a 140p offer, it is likely to be well received by Vincent Bolloré. He has spent hundreds of millions of pounds building up a 25 per cent stake in Aegis over the past two months and will pocket a handsome profit from such a deal. In the past it has been suggested that the French financier would like to engineer a tie-up between Aegis and Havas, where he also has a major shareholding. But analysts point out that Havas will struggle to finance such a deal. If WPP were to win Aegis it would leave Publicis, another big player in the advertising world, very much in the cold. And not for the first time. In 2002 WPP beat off Publicis in the battle for control of Cordiant.

In the FTSE 100, Vodafone fell a further 0.5p to 128.75p as a plethora of brokers downgraded their recommendations on the mobile phone giant. Among them, Investec Securities cut its rating all the way to "reduce" from "buy", while JP Morgan downgraded it to "neutral" from "overweight".

The move follows Tuesday's profits warning from Vodafone, which complained of rising competition and ongoing problems at its Japanese division. Investec Securities said it would rather see the group consider withdrawing from this market than continue to invest heavily there. JP Morgan was more concerned about how Vodafone plans to keep growing its customer base globally without spending too much money.

Cable & Wireless dropped 2.5p to 117p on the back of bearish comments from HSBC Securities. Although the company has long boasted of a sizeable cash pile, the broker warned investors that C&W is burning through its capital at quite a rate.

Similarly, Hilton lost 10.25p to 339p after Lehman Brothers downgraded the stock to "underweight" from "overweight" and cut its price target to 320p from 345p. The move came before today's expected trading statement from the leisure group and reflected worries at the US broker about the performance of the company's betting division. Lehman said: "We are turning moderately more cautious on the pace of recovery for the betting businesses."

Redrow lost 17.75p to 468p as Merrill Lynch sold 4.75 million shares at 468p on behalf of an institutional client. Asia Energy, off 4p to 418.5p, said it had sacked Evolution Securities as its broker. JP Morgan Cazenove is now the coal group's sole broker and nominated advisor. Victoria Oil & Gas soared 11p to 57p after announcing that its well in West Medvezhye, Russia, contains half a trillion cubic feet of recoverable gas. Brokers applauded the news and said it puts Victoria Oil & Gas firmly among much larger Russian and former Soviet Union operators such as Sibir Energy and JKX Oil & Gas.

Empire Interactive rose 0.25p to 7p on news of a tie-up with Microsoft. The deal will see Empire republish some of the US software giant's top games, including Flight Simulator, Zoo Tycoon and Train Simulator. These will be available on the UK market in time for Christmas. Monstermob ticked 1p higher to 389.5p on talk that the group will soon put out a bullish trading statement.

Similar talk surrounded Hyder Consulting, steady at 260.5p. Gossips reckon that trading at the company is ahead of expectations and hinted it will soon put out a statement to boast about this. Whether this proves to be true, only time will tell. Investors in Hyder are clearly hoping for some kind of positive news from the company. Its shares have soared by 30 per cent since the beginning of September.

Meanwhile, market professionals suggested that Oil Quest Resources, steady at 15p, is mulling a significant acquisition. According to the talk, Oil Quest is considering the purchase of a private company, probably to be structured as a reverse takeover, with assets in the North Sea.

Finally, Healthcare Enterprise collapsed 35.75p to 19.75p after unveiling the mother and father of all profits warnings.

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