Market Report: BHP boosted by rumours of taking out a rival

Despite a huge surge in the value of mining assets over the past few years, there is yet to be a deal that propels any of the major industry players into the global league of mega-cap companies. One rumour doing the rounds among Australian brokers could mean BHP Billiton becomes the first to move into the top league, taking out one of its major rivals in the process.

The word is that BHP is talking to the French oil group Total with a view to selling its oil interests in the Gulf of Mexico and using the proceeds to bid for Rio Tinto or Anglo American. BHP's Mexican interests are owned jointly with the oil giant BP, with BHP owning 56 per cent to BP's 44 per cent. The development, called Atlantis, is proving more expensive than BHP anticipated, and it is thought that although the company has told investors that Atlantis is a core asset, the right offer could tempt the company.

The word is that BHP's stake is severely undervalued by the market and could be worth up to $40bn (£20bn). Even if it is not sold traders said the Atlantis project could lead to a major rerating of BHP shares. BHP closed 7p firmer at 983p, with Rio Tinto 11p better at 2,702p and Anglo American unchanged at 2,393p.

The platinum and catalyst group Johnson Matthey headed the list of blue-chip winners after the broker UBS upped its target price for the shares to 1,800p from 1,490p. The Swiss broker says the company is its preferred play in the chemicals sector and that underperformance against its peers has created a good buying opportunity. The shares surged 91p to 1,583p, a new high.

The hedge fund manager and futures broker Man Group was also in previously uncharted territory after a 24p jump to 570.75p. The world's largest quoted hedge fund manager is expected to float its brokerage unit this year and is reported to have appointed investment banks to prepare the float. The broker Credit Suisse also upped its price target for the stock to 630p.

The old "HSBC to bid for Prudential" rumour got another airing but most brokers believe there is little chance that the banking giant will do so. One trader said: "There is little reason for assuming there is any more truth in that story now than any other time it has done the rounds. It's a long shot to put it mildly." Even so, Prudential found support and closed 7.5p better with more than 22.7 million shares changing hands. Shares in HSBC were unchanged at 9.5p.

In the wider market, the week's trading in London ot off to a quiet start with little to tempt traders into taking new positions. With Wall Street giving little direction, most London investors stayed on the sidelines as the FTSE 100 closed 7 higher at 6317.9.

The betting group Ladbrokes fell on mild profit-taking after a week of bid speculation. The broker Credit Suisse cut its rating on the shares to "underperform" from "neutral" on valuation fears, sending the shares 3.75p worse to 448.75p. The investment bank told investors the shares "no longer offer good value" and a private equity bidder would have to go out on a limb to justify a bid at these levels.

The commercial oven and fridge maker Enodis has crept back its highs after the collapse of takeover talks in August, despite a profits warning from the suitor Manitowoc last week. Investors hoping for another bid approach will be aiming for a minimum of 250p per share. Enodis closed 4.5p firmer at 216.75p.

Monterrico Minerals, the mining group developing the Rio Blanco copper mine in Peru, thought to be one of the world's largest deposits, finally had a formal bid approach nearly four months after confirming it was in talks. The Chinese consortium Zijin offered 350p per share in cash and if successful would complete the first takeover of a London-listed company by a Chinese buyer. Some brokers believe the bid undervalues the company, and Seymour Pierce reiterated its "buy" advice with a 486p price target, helping Monterrico close 68.5p better at 366p.

Dolphin Capital Investors, one of the largest AIM companies, nudged 2p better to 125.5p, a new all-time high. The company is to invest up to €35m to buy and develop a resort in Croatia. Dolphin is worth more than £420m, enough to get it straight into the FTSE 250.

Consolidation in the housing sector helped Wren Homes, the AIM-listed builder of retirement properties, climb 5p to 59.5p. Traders said the falling number of quoted housebuilding stocks and its niche position in a growing market should mean the shares continue to outperform.