Market Report: Bid talk sends Pilkington on roller-coaster ride

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Takeover speculation circled Pilkington yesterday, sending shares in the glass maker surging, before falling back.

Takeover speculation circled Pilkington yesterday, sending shares in the glass maker surging, before falling back. Traders piled into the stock as talk of a 150p-a-share offer for the company from Nippon Sheet Glass, its biggest shareholder, circled the Square Mile. At one point during the session Pilkington shares traded at 138.75p but they dropped back to close at 125.5p, up 7.75p, after a spokesman for the company denied the speculation.

"We are not in any discussions regarding a potential takeover" said a spokesman for the St Helen's-based group. At 150p a share, Pilkington would be valued at a little less than £2bn but even then it remains a relatively small player when one looks at the global glassmaking industry. St Gobain, a French rival, was also mentioned by some as a possible suitor for Pilkington.

Market professionals reckon the excitement surrounding Pilkington was merely caused by investors looking for the next takeover target in the building materials sector. Aggregate Industries, Novar and RMC have all received bids in the past six months.

Meanwhile, the FTSE 100 dropped 5.6 points to 4,818.3, while the FTSE 250 rose 31.8 to 7,088.8. Dealers reported heavy buying of Barclays call options amid vague whispers that a predator might be lurking for the UK banking giant. Call options allow investors to make a large amount of money from a sharp rise in a share price with a relatively small outlay of cash. Barclays closed 1.5p higher at 589.5p.

Emap soared 25p to 835p as Morgan Stanley was heard making very positive comments about the media group after a meeting with the company earlier in the week. Rexam dropped 6.25p to 459.25p ­ this time the US broker is believed to have had a negative influence. Morgan Stanley urged investors to take profits from the stock which stands close to a three-year high.

Elsewhere, EMI dropped 6.5p to 263.5p as Credit Suisse First Boston suggested the music group may struggle to deliver on the 3 per cent sales growth currently expected by the bulk of the City. The Swiss broker believes EMI was up against intense competition from rivals over Christmas and warned its clients that the surprise margin improvement the group enjoyed in the first half of its year may be reversed in the second half due to higher artists' royalty and marketing costs. CSFB believes the stock will underperform in the short term and set a 240p price target.

Bears of Evolution Group got their paws burned as shares in the stockbroker rose 3.75p to 157p on talk it may soon unveil a share buy-back programme. There has been a short position in the company for some time and at one point it was rumoured to be as high as 13
per cent of the group's share capital. However, those betting against Evolution have taken a nasty hit as its shares have performed strongly. Should the remaining bears rush to close their positions all at once market professionals reckon it could cause the stock to soar.

Business Post added 19.5p to 668p on whispers of a bid for the group, possibly from its German rival Deutsche Post. British Energy, which returned to the stock market only on Monday, registered its third day of losses in a row, falling 7p to 247p. A bearish note from Morgan Stanley was to blame. It started coverage of the electricity generator with an "underweight" recommendation and set a price target of just 210p.

Luminar dropped a further 5p to 558p as the late-night bars group confirmed it would be putting out a trading statement today. Recent rumours surrounding the company have hinted the statement will disappoint the City and some even suggested yesterday there may be resignations from the board in its wake. But Bridgewell Securities was not so sure. "We would be surprised if Luminar experienced a difficult Christmas period resulting in a significant deterioration in trading," the broker said.

Among smaller companies, Canisp added 1.5p to 30p after the telecoms group sold a loss-making division for £340,000. Brokers reckon Canisp is now close to being profitable and possibly vulnerable to a takeover bid from a bigger player. Petroceltic improved 1p to 9.87p as investors got excited about the explorer's upcoming drilling programme in Algeria. The company is expected to start exploring its sites in the North African country in March.

Connaught added 2.5p to 575p amid talk that the group has won £120m of orders over the past quarter, thereby significantly boosting its order book. Suggestions that the online advertising specialist Deal Group Media has been successful in signing blue-chip companies to its fast-growing list of clients pushed its stock 0.75p higher to a fresh high of 18p.