Market Report: Bid speculation pushes FTSE 250 to new highs

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The Independent Online

The FTSE 250 was crawling with bid rumours yesterday and the speculation pushed the mid-cap index to a record high of 8,306, up 60 points. Punters seemed most convinced by talk of a bid for EMI which left shares in the music group up 10 per cent at 242p.

According to the gossip, a private-equity firm is looking to table a 300p-a-share offer for the company. There were also suggestions that Warner Music is considering a move. Analysts have long argued that such a tie-up makes great sense, given the cost savings that it would unlock.

Elsewhere in the FTSE 250, SkyePharma jumped 2.5p to 56p on talk that Novartis is about to launch a 70p-a-share offer for the group. Bulls of Skye believe that such a scenario would prompt GlaxoSmithKline into making a counter-offer because of its various collaborations with Skye. The Swiss drugs giant did not wish to comment on the speculation.

Amec was another major talking point. The stock soared in the morning on reports that the construction group had received a takeover offer from a rival from continental Europe. Amec has long been touted as vulnerable to takeover, with the Spanish group Acciona most often mentioned as a likely buyer of the company. But Amec shares lost ground in the afternoon and closed 8.5p lower at 357p as investors lost their ardour for the takeover story. A denial from Acciona also weighed on the stock. The Spanish company said it had no plans to buy Amec.

In the retail sector, punters piled into WH Smith, 12.25p higher at 409.75p, for the third day in a row, hoping the company will soon get an offer from a US private-equity house. According to people who know Smiths well, the company has so far not received an approach. Market professionals pointed out that if a predator is stalking the retailer, it is likely to wait to see how the group performs over the key Christmas trading period before making a move. Hot money also poured into Cookson, 15.25p higher to 380.25p, as takeover rumours circled the engineer. Shares in the group have risen 20 per cent over the past month.

MFI Furniture added 4.25p to 73.5p after Citigroup upgraded the stock to "hold" from "sell". It pointed out that shares in the group have lost 30 per cent of their value since the company's profits warning last month because of worries about trading at its Howden Joinery division and UK retail arm, and also because of rumours of a rights issue.

However, the US broker believes that had there been any truth to the speculation, MFI would have put out a statement by now. Citigroup said: "Whilst we have feared that the severe deterioration in trading at the retail business might eventually impact Howden, there is no hard evidence to suggest this has indeed been the case." Market professionals have long warned about a sizeable short position in MFI shares and yesterday's comments from Citigroup caused only pain for bears of the stock.

Savills rose 31p to a fresh all-time high of 902p after Panmure Gordon raised its stance on the estate agent to "buy" from "hold" and slapped a 1,020p price target on the stock. The broker is particularly upbeat about the prospects for the fund management business at Savills.

EasyJet gave up 6.5p to 333.5p as Deutsche Bank called time on the airline's soaraway share price. Cutting back its stance to "hold" from "buy" the German broker said it was cautious about earnings at the no-frills carrier next year. At one point, EasyJet traded as low as 322.25p but dealers suggested that fresh demand for the stock from Icelandair, the group's second-biggest shareholder, had provided support for the stock.

Lower down the pecking order, Lok'n Store dropped 3.5p to 152.5p after its chairman Simon Thomas sold 100,000 shares at 154p, cutting his stake in the storage group to 2.3 million. The opposite occurred at Torex Retail, 2.5p higher to 114p. Christopher Moore, the executive chairman of the software group, bought 300,000 shares at 111p and now holds 12.1 million, or 3.7 per cent, of the company.

Finally, Celtic Resources rallied 2p to 179.5p as the group played down suggestions that its stake in a large Siberian gold mine had been diluted by its local partner Norilsk Nickel. Norilsk and Celtic are 50-50 shareholders in the Nezhdaninskoye mine in Russia - one of the country's biggest gold deposits.

Investors have been worries about the status of Celtic's stake since Friday's extraordinary meeting which approved a new share issue at the mine, giving control of the venture to Norilsk. But Celtic assured the City yesterday that a Russian court had banned the meeting from approving the issue of new shares, thereby leaving its stake intact.

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