Market Report: Aviva falls amid talk of £900m fundraising

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The Independent Online

Aviva, the Norwich Union owner, is rumoured to have begun marketing itself to investors with the aim of selling £900m worth of shares to fund the acquisition of its US rival AmerUs Group, valued at about £1.25bn. Confirmation of the fundraising is expected to be announced this morning.

Aviva is thought to be offering potential investors a 1 per cent discount to the market price based on yesterday's close - indicating 127 million new shares at 7.06p per share. The word in the market is that the issue is likely to be fully taken up by current shareholders, most of whom are thought to have positive views on Aviva's attempts to participate in the consolidation of the industry. Shares in Aviva fell 10.5p to 713p, while UK rival and one-time target Prudential, now thought to be out of the running for a bid, was unchanged at 575.5p.

Strong metal prices and a fresh round of broker upgrades helped the mining sector, with the blue-chip newcomer Lonmin strongly ahead, closing 126p firmer at 2,905p. Copper hit a five-week high amid supply concerns, while nickel hit a new all-time high. Lehman Brothers upped its forecasts for a raft of mining groups, including Xstrata, 111p firmer at 2,132p, Anglo American, up 35p to 2,270p, and Rio Tinto, 25p better at 2,885p.

In the wider market, another slow session ended with the FTSE 100 closing at 5,860.6, 3.3 better, as a mixed bag of trading news, broker notes and sentiment left the market without much direction.

Despite the US House of Representatives passing legislation aimed at curbing the activities of online gambling operators, buyers were out in force to prop up shares in PartyGaming. After three-and-a-half hours of debate it now looks increasingly likely that the bill will not pass through the Senate, which is required before becoming law. A raft of brokers published positive notes on PartyGaming. Morgan Stanley, ABN Amro and Dresdner Kleinwort all reiterated their "buy" advice on the shares, citing the group's cash generation and growth prospects. Dresdner was the most bullish, with a 210p target price for the shares, which closed 4.5p firmer at 110.25p. Surprisingly 888 Holdings, thought to be a bid target for a number of gambling groups, was unable to follow PartyGaming and shed 3p to 205p, while BETonSPORTS firmed 6.5p to 146.5p.

After a big sell-off on Tuesday, technology issues bounced back, as traders took the falls as a buying opportunity. Wolfson Microelectronics, 25.75p better at 412p, was hit hardest after television maker LG Phillips said sales of LCD televisions were below expectations. One trader said: "Wolfson is a quality operation. The selling on Tuesday was unwarranted and scared a few too many holders into selling, creating a great buying opportunity." Microchip rivals CSR and ARM Holdings also bounced back, adding 47p to 1,147p and 2.25p to 106.25p respectively.

Tomkins, once a guns-to-buns conglomerate but now a slightly more sedate engineering, automotive parts and building parts manufacturer, was well supported after Goldman Sachs upgraded its opinion on the shares from "sell" to "buy" with a price target of 350p. Goldman reckons fears over the company's exposure to the US consumer market are in the price and that the risks to the upside outweigh those to the downside. The shares added 6.75p to close at 279p on decent volume of 8.2 million shares.

Once again there was a weak market in Plusnet, the home broadband provider, as investors continued to abandon the stock over worries that increasing competition will price smaller players out of the market. With The Carphone Warehouse, Orange and BSkyB all entering or preparing to enter the home broadband market, traders said that margins will be under pressure at Plusnet, sending the shares 6p lower to 147.5p. The shares have collapsed since March when the stock was trading north of 400p.

The word in the market is that Enterprise, the utility services and maintenance group, is poised to receive a 525p cash offer from a mystery private equity buyer, valuing the company at £420m. Volume was strong and market makers said "quality buyers" were behind much of the trade. The identity of the suitor remains unclear but most traders believe the company's current market capitalisation of £356m rules out the biggest buyout houses.

A bullish research note on Central China Goldfields from the specialist precious metals investment guide Goldletter International helped the shares tick 0.5p firmer to 15.5p. The company is in the process of trial drilling at its Snow Mountain project in China and traders said the results could be published next week. Goldletter has a price target on the shares of 30p, almost 100 per cent higher than the current price.

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