Market Report: Bid approach rumours lift London Scottish Bank

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The Independent Online

If you believe the latest market gossip, London Scottish Bank could soon find itself on the receiving end of a bid approach. Dealers yesterday reported rumours that the consumer credit specialist, up 2p at 126p, is being stalked by a private equity house looking to take advantage of the company's lowly valuation. They talked of a bid as high as 175p a share for LSB.

If you believe the latest market gossip, London Scottish Bank could soon find itself on the receiving end of a bid approach. Dealers yesterday reported rumours that the consumer credit specialist, up 2p at 126p, is being stalked by a private equity house looking to take advantage of the company's lowly valuation. They talked of a bid as high as 175p a share for LSB.

Despite the excitement of some gossips, however, analysts on the whole were dismissive of the suggestion. "I would be very surprised to see a private equity player table a bid for a lender like LSB," said one, although he did not rule it out as impossible. The analyst took the view that if anyone is to buy the group it is likely to be a larger bank, possibly one of the high street giants. According to the theory, as competition among the major high street banks continues to hot up they are more likely to consider breaking into the non-prime lending arena, which sees the likes of LSB give loans to people with poorer credit ratings.

Not so long ago HSBC carried out exactly such a move via its purchase of Household in the US. But before investors get too excited about this happening at LSB it is worth noting that the whole sub-prime lending industry is presently facing the prospect of an Office of Fair Trading investigation. The sector has recently come up against accusations that it has been charging excessively high interest rates and that some players operate virtual monopolies in many parts of the country. This could cause any prospective bidder to wait until the issue is resolved before making a move.

Meanwhile, talk of an imminent takeover of Matalan really got shares in the discount retailer moving. They finished 11.75p better at 226p as rumours of a 280p-a-share offer from Wal-Mart circled dealing rooms. Bulls of Matalan have long been pinning their hopes on someone buying the company. Key to its future will be the stance of John Hargreaves, its chairman. He controls 52 per cent of the retailer. Matalan failed to issue a statement addressing the speculation. The steer from the company was that it currently had no plans to do so.

The FTSE 100 index gained 1.8 points to 4,565.6. The latest changes by FTSE were certainly a talking point. As predicted Cairn Energy, down 24p to 1,450p, won promotion to the blue chip index but it did so at the expensive of Bradford & Bingley, down 0.5p to 293p. Schroders survived relegation, finishing 3p better at 651p, in what proved to be a tight-run contest between it and the mortgage bank.

In the FTSE 250, Thus also managed to avoid relegation, rising 1.75p to 19p. Shares in the telecoms group were boosted by news of a deal with Chrysalis Radio. Losing their place in the index was Xansa, up 0.25p to 75.25p, Eurotunnel, unchanged at 18.75p, and Reg Vardy, down 2p at 427.5p. Those promoted were Halfords, 0.25p lower at 290p, Premier Foods, up 1.5p to 232.25p, and Virgin Mobile, 0.5p weaker at 197.5p.

Abbey National ticked 0.5p higher to 612p after Citigroup became the latest brokerage to predict that Abbey will receive a counter-bid to that from Banco Santander. It believes that the only UK banks with any realistic chance of getting regulatory clearance for a deal are HBOS and HSBC. Citigroup calculates that a link-up between HBOS and Abbey would generate synergies of about £770m per annum, double Santander's target, but believes that the Spanish bank will most probably emerge victorious in a battle for Abbey.

Somerfield dropped 4.25p to 135.25p on worries that today's trading statement from the supermarket group could well disappoint. Some even talked of a profits warning from Somerfield. Among furniture retailers, ScS Upholstery improved 7.5p to 282.5p on talk that the group has enjoyed strong trading over the past three months. Bulls of the stock believe business at ScS is running ahead of management expectations.

RMC jumped 8.5p to 644p as traders bet that it will not be long before the company is taken over. Some believe a move on the building materials group could be just around the corner.

Lower down the pecking order, Sci Entertainment jumped 5.5p to 109.5p as it emerged that the group's recently released Conflict Vietnam game has gone straight to number one in the Playstation 2 and X-Box console charts. Conflict Vietnam is Sci's third release in the series and initial estimates indicate that it could well prove to the most successful of them all. It will be released in the US next month.

Huntleigh Technology improved 1.5p to 364p on whispers that its results next week will beat expectations. Richmond Foods soared 39p to 512.5p after the ice cream maker boasted that it is trading ahead of market forecasts. Axon added 7p to 129.5p as the technology consultant reported a 43 per cent rise in interim profits and said that the positive momentum is likely to continue into the second half of its year.

Market Movers

¿ Hays 125.5p (up 1.5p, 1.2 per cent). Unveils forecast-busting full-year results, prompting brokers to raise earnings estimates at the group in 2005.

¿ Aegis 92.75p (up 5.25p, 6.0 per cent). Says that the global advertising recession which started in 2000 is now over and reports a solid jump in first-half profits.

¿ Wellington Underwriting 86p (up 4p, 4.8 per cent). Panmure moves its clients into the stock after the insurer reports an interim pre-tax profit of £32m, up from £24m a year earlier.

¿ WS Atkins 680p (up 30p, 4.6 per cent). Boasts that the year has started well and that its full-year figures are likely to top expectations.

¿ Punch Taverns 480p (up 12.5p, 2.7 per cent). Dresdner Kleinwort Wasserstein upgrades to "buy" from "hold" after a solid trading statement from the pubs group.

¿ Tecteon 3.13p (up 0.75p, 31.7 per cent). Boasts of a licensing agreement for its technology with a major telecoms equipment manufacturer.

¿ Flightstore 5.25p (up 0.75p, 16.7 per cent). AGM statement excites.

¿ Clapham House Group 140p (up 14.5p, 11.6 per cent). Issues a very bullish trading statement at its AGM.

¿ GlaxoSmithKline 1,137p (down 15p, 1.3 per cent). Dresdner Kleinwort Wasserstein downgrades to "hold" from "buy" on worries about the strong competition facing the group's Advair drug.

¿ Brixton 309p (down 12p, 3.7 per cent). Unveils a 51 per cent jump in first- half profits but unsettles investors by issuing a cautious outlook statement.

¿ Davis Service 376p (down 9.5p, 2.5 per cent). Brokers rush to downgrade after disappointing results.

¿ Westbury 432p (down 7.75p, 1.8 per cent). Profit taking after a confident trading statement from the house builder.

¿ Lavendon 120p (down 21.5p, 15.2 per cent). Interim results take a hit from a deterioration at the group's German business.

¿ Reed Health 54p (down 5.5p, 9.2 per cent). Issues a profits warning.

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