Market Report: Bid rumours build up over acquisitive Wolseley

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The Independent Online

After a frenzied acquisition spree, the building and plumbing supplies group Wolseley could itself be on the receiving end of a bid if rumours doing the rounds yesterday turn out to be true.

The word in the market is that the French rival St Gobain is mulling an offer with the bidding expected to start at 1,500p. Traders said a bid from an industry peer is bound to spark interest from private equity sources, although a valuation of close to £12bn including debt is likely to mean a consortium of private-equity bidders rather than a single suitor. That said, the valuation is no longer high enough to be out of buyout range. If the US housing market experiences the soft landing that most analysts are hoping for, traders said Wolseley is well positioned to test last year's high of 1,458p sooner rather than later. Shares in Wolseley were in demand all day, in spite of the poor overall market conditions, and closed 28p firmer at 1,290p.

Once again, the weak copper price led to a big sell-off in mining issues, but as opposed to Wednesday there was little buying elsewhere to offset the selling. Commodity stocks dominated the list of fallers, with Xstrata falling another 97p to 2,320p. The stock has lost almost 10 per cent in the past two sessions. Pure copper plays Kazakhmys and Vedanta Resources were also out of favour, shedding 47p to 1,040p and 40p to 1,118p respectively.

A bullish note on Aquarius Platinum, down 27p to 1076p, by the broker Citigroup, helped the stock to outperform the rest of the mining sector despite closing in the red. The US investment bank believes that the price of platinum is likely to stay above $1,000 an ounce for the foreseeable future thanks to demand from the automobile market and limited supply. It upped its price target for Aquarius to 1,400p.

Telecommunications stocks continue to outperform the market after a strong finish to 2006. Although Vodafone is reported to be involved in a competitive auction for Hutchison Essar in India, the German bank Dresdner Kleinwort believes that the "strategic and financial logic is compelling". However, it also warns that the deal could dilute headline earnings by 5 per cent in the first year. Dresdner reiterated its "buy" stance on Vodafone as the shares closed 3p firmer at 148.25p, a 15-month high. Meanwhile, BT Group maintained its strong recent form with an 8.25p gain to 319.25p.

London shares got off to a rough start following Wall Street's 100-point swing on Wednesday, shedding 58 points in early deals before some afternoon buying helped the FTSE 100 index cut losses and close 32 worse at 6,287.

News that the private-equity house Blackstone has offloaded half of its remaining stake in Southern Cross Healthcare sent the shares to the top of the FTSE 250 leaderboard. The sale of 21.3 per cent of the stock, arranged by the brokers UBS and Morgan Stanley, raised £127.5m for Blackstone before expenses. Traders said there were plenty of eager buyers for the shares and that the increase in liquidity due to the sale should help the stock. The sale pushed the shares 26.25p firmer to 345p.

As the price of oil continues to soften, investors are deserting second-line exploration and production stocks. Venture Production led the mid-cap fallers with a 47p loss to 827.5p, with Burren Energy not far behind after closing 44.5p worse at 844.5p. Burren has lost more than 22 per cent of its value since last January. In early trade on the New York Mercantile Exchange, crude futures dipped as low as $58.30, a fall of 4.5 per cent.

Shares in the aerospace and defence group Cobham were in demand as the Spanish investor Francisco Rubiralta Vilaseca disclosed the acquisition of a 5 per cent stake in the firm late on Wednesday. The group said it was not aware of his intention to buy the stake and that, rather than launch a full bid, Mr Vilaseca is expected to be a passive long-term investor. Even so, the shares surged 12.5p in early deals before a bout of profit-taking saw them end 3p up at 198.5p.

In the small-caps, an encouraging trading statement from the property services group Rok led to upgraded price targets from Numis Securities and Altium Securities, both of which retained their "buy" advice. The former upped its target to 1,000p while the latter is looking for 1,017p as the shares closed the session 42p firmer at 936.5p.

Traders are betting Avon Rubber, up 9.5p to 165.5p, could be in for a bid. Volume in the stock was more than 10 times the daily average as almost 700,000 shares changed hands.