Market Report: All eyes on M&B for new move by Tchenguiz

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The Independent Online

Pub and bars investors will have a close eye on Mitchells & Butlers today. Six months have passed since the failed takeover bid by R20, the investment group headed by property tycoon Robert Tchenguiz, meaning that he is now free to bid again.

Shareholders will not be too upset that the 550p-per-share offer made by R20 failed; the shares closed yesterday a penny better at 612p, 11.3 per cent better than the original offer. Most traders believe it is unlikely that Mr Tchenguiz will make another offer straight away, and broker Numis Securities thinks that if a new offer is made it will not be until after the group reports preliminary results on 29 November. Even so, Numis believes that the rationale behind the original offer, merging M&B's pub estate with Mr Tchenguiz's own private pub portfolio, Laurel, still stands and few investors are prepared to believe that Mr Tchenguiz has given up the chase entirely.

Last week's first-quarter numbers from the satellite broadcaster BSkyB gave the shares a boost despite conflicting interpretations of broadband sign-up numbers. However, Citigroup is not impressed and reiterated its "sell" advice on the shares yesterday with a price target of 500p. The US investment bank told clients that its lowered forecasts for 2007 and 2008 were mainly based on the weak advertising market and increased spend on the group's flagship Sky One channel. The shares fell half a penny to 558.5p.

Citigroup was also bearish on Rolls-Royce, initiating coverage of the engine-maker with a "sell" recommendation and a 425p price target. Investors took more notice of Citigroup than they did of Dresdner Kleinwort as the shares closed 3.75p worse at 463p. The German broker urged its clients to buy Rolls-Royce shares, giving them a 550p target price.

In the wider market, London shares powered on to new highs on the back of strong retail and real estate sectors. The FTSE 100 closed the session 19.5 better at 6,244. British Land, 22p better at 1,527p, benefited from a bullish note from HSBC Securities as the bank suggested clients switch into the stock and gave it a 1,676p target price. Meanwhile, Marks & Spencer reported results in line with forecasts but the stock went into orbit, closing 41.5p firmer at 698p, a nine-year high.

Speciality chemicals group Croda International attracted some speculative interest on talk that a private equity group is running the rule over the company. The shares peaked at 552p before a bout of profit-taking sent the shares back to close at 542p, a 12p rise.

Photo Me International has been in bid talks for what seems like an eternity. Traders seem to be getting a bit fed up waiting for developments, since it is now more than four months since the photo booth operator said it was conducting a review that may lead to the sale of the company. The shares have tracked back from a 12-month high of 116p to yesterday's 94.5p closing price, 2.5p worse on the session.

On the upside, electronics and ceramics manufacturing group Cookson pleased the market by telling investors that it expects full-year results to be better than market forecasts. Broker Numis Securities upped its forecasts for the group and said it expects other brokers to follow suit. Numis increased its target price for the shares to 725p, up from 686p, as the shares added 32p to close at 630p.

Traders are looking for some news from restaurant and leisure group Whitbread, 26p better at 1,480p, yet another all-time high. The word in the market is that Starwood Capital, an American private equity property group, is poised to launch a bid for the company.

In the small caps, shareholders of the cash shell Flightstore will have their fingers crossed that the mortgage is about to get paid off. The shares soared to 0.59p from 0.085p, an incredible rise of 737.5 per cent, before trading was suspended. A group of investors is reported to be poised to invest £200,000 in the company. The shares remained suspended by the close of business.

The struggling information technology group iSoft took another pounding to close 4.75p worse at 35p, a new all-time low. The stock has been hovering just under 50p for the last few weeks but charting traders said the shares are likely to move lower before any recovery.

The recruitment group Quantica moved down from the full list to AIM and gave investors a profit warning into the bargain. However, volume was very high at 8 million shares and there is talk that the warning leaves the company vulnerable to a bid. The shares closed 6p worse at 30.5p.