Market Report: Bid fears make Morgan Crucible too hot to hold

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The Independent Online

Fears that takeover talks at Morgan Crucible have hit a snag sent investors rushing for the exit yesterday. Shares in the 150-year-old engineering group closed 6.5p lower at 285p as punters bailed out, although at one point in the session they traded as low as 277.5p.

Morgan Crucible, which makes ceramics used in the manufacture of steel, has been in talks with DLJ, the private-equity arm of Credit Suisse, for more than a month and many in the City were expecting it to be bought for around 315p a share. This would value it at £924m. However, if you believe yesterday's dealing room gossip, negotiations have hit a sticking point because DLJ wants to cut the offer price. Given it is the only bidder in town at the moment, it is understandable that investors were unnerved by the rumours.

Shares in the engineer have risen from 230p to a high of 300p on news of the bid. Should talks collapse, analysts expect the stock to fall to around the 250p level. SGL Carbon, a German rival, had its attempt at tabling a bid frustrated by Morgan Crucible, although it does reserve the right to return if a rival offer is tabled. But, as SGL is about half the size of the UK group, analysts believe it may struggle to make an acceptable proposal to the Morgan Crucible board.

Despite the pain suffered by those betting on corporate action at the engineer, punters were still willing to hunt the market for other takeover candidates. Hence, SSL International gained 5.25p to 340.75p on hopes that the condom maker's days as an independent entity are numbered. SSL would certainly make an attractive acquisition for a global healthcare player like Johnson & Johnson. Analysts have estimated that combining the two could generate cost savings of up to £100m.

Meanwhile, the FTSE 100 rose 56 points to 5,930 as the Dow Jones average came within a whisker of an all-time high.

Hanson had a volatile session. In the morning its shares roared to 754.5p after ABN Amro suggested the building materials group could end up being bought for as much as 1,150p a share. But as the session wore on, investors locked in profits, leaving the stock at 721p, down 9p on the day. Hanson is expected to host a series of presentations to institutional investors today. Management are bound to be quizzed on the persistent takeover rumours which have surrounded the company in recent weeks.

Brambles Industries put on 5p to 468p on talk a bid for the supplier of industrial pallets is imminent. Gossips reckon Wesfarmers, an Australian conglomerate, is considering a 600p-a-share offer for the company. However, those who know Brambles well are far from convinced that a deal is just around the corner. They point out that Brambles is in the process of selling off non-core divisions to focus on pallets. This process should be complete by the end of the year, which would be a much more opportune moment for a predator to strike.

At the smaller companies end of the market, Antisoma registered one of the best performances. Shares in the biotech jumped 4.25p to 19.5p after it released the results of a clinical study showing that its AS1404 drug helps lung cancer sufferers live longer. Antisoma's chief executive, Glynn Edwards, said the data will help the group secure a partner for the product. He told investors to expect a deal "sooner rather than later". Some City analysts believe AS1404 has the potential to become a blockbuster with sales of more than $1bn.

Ceres Power added 11.75p to 226.75p after Harry Fitzgibbons, a non-executive, bought 20,000 shares in the company at 219p, taking his total holding to 200,000. There was also director share buying at Educational Development International, a provider of vocational qualifications. It rose 0.25p to 12.5p after Nigel Snook, the chief executive, bought 1 million shares at 11.75p.

Finally, Biofuels slumped 15p to an all-time low of 64p after it stopped deliveries from its Teesside plant after output fell below industry standards. This is the latest in a series of hiccups at the maker of environmentally friendly fuels. Biofuels said it is working towards a solution to the problem and suggested that deliveries would progressively resume from next week.

Numis Securities described the setback as a "temporary glitch". It nevertheless urged investors to abandon the stock, warning that the group's £80m debt burden is much more of a worry.