Market Report: Bidders circle rudderless Cable & Wireless

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The Independent Online

Bid talk once again swept through the London markets yesterday, some of it credible, some of it less so. Long-term Cable & Wireless shareholders may be about to get the opportunity to put themselves out of their misery, as rumours circulated the market that a consortium of private-equity bidders may put together an offer for the beleaguered telecoms company.

In the dim and distant past, C&W traded at more than 1,500p as private and professional investors alike bought into the idea of a new economic paradigm. However, reality hit the stock, and its shares trade at less than one-tenth of their peak value.

Private-equity firms as well as trade buyers have been very active in telecoms in the past 12 months, with a handful of huge deals being completed. O2 was bought by Telefónica; Amena was acquired by France Telecom from under the noses of a handful of major private-equity players; and TDC fell to Europe's largest leveraged buyout. The word in the markets yesterday was that C&W is about to join them, with the private-equity giants Apax Partners, Kohlberg Kravis Roberts and Providence Equity Partners thought to among those mulling an offer.

Given the precarious state of the business and weak position of management after January's departure of Francesco Caio, the chief executive, traders said a buyer could offer just125p a share for the company. C&W shares were well bid, closing at 106.5p.

After commodity stocks put the dampers on the FTSE 100 on Wednesday, there was the inevitable bounce back yesterday as strong numbers from the gas supplier BG and a rally in the commodities futures markets saw yesterday's losses regained. BG closed up 57.5p at 675p after its numbers trounced expectations, leading the index up 83.6 to 5808.7, its highest close since early 2001.

After Wednesday's falls mining stocks rallied, with Rio Tinto rising 55p to 2,836p, Anglo American up 73p to 2,085p and Xstrata closing at 1,634p, up 66p.

The housing sector has long been considered ripe for consolidation, with a number of mid-sized players providing ample competition in a highly fragmented market. Persimmon the first to get the ball rolling with its acquisition of Westbury, and the company was rewarded with promotion to the FTSE 100.

Whispers in the market yesterday were that Bovis Homes was being lined up for a bid valuing the company at £1.1bn, or 925p a share. Wednesday's talk had been that Bovis would merge with its rival Redrow, but traders now believe that an all-cash offer will be made for the Kent-based housebuilder. Despite that its shares, which like most stocks in the sector are very close to an all-time high, were 2p lower at 815.5p. Meanwhile, Redrow climbed 15p to 570p.

Among the more unlikely takeover chat was that the US banking giant Citigroup had either Barclays or Royal Bank of Scotland in its sights. The Barclays story is an old one but RBS was previously thought to have been too large to tempt a bidder. Shares in RBS surged 42p to 1,788p, giving the UK's second-largest bank a capitalisation of £55.6bn.

One trader said: "This sounds like the rumour to end all rumours. Citigroup would probably have to find about £75bn to tempt RBS to sell out, and given its problems at home and abroad that looks unlikely. But it is bound to be linked with the smaller banks."

Barclays rallied 16.5p to 637.5p; the perennial bid target Lloyds TSB was also higher, up 16p at 549p, a three-year high. The Dutch bank ABN Amro and its Spanish rival BBVA are thought to be pursuing Lloyds TSB.

Ultimate Leisure, the pubs and bars chain, was up on the back of hopes the Reuben brothers would bid for the company. The Reubens have a 29.9 per cent stake in the group, but traders also pointed out the company trades at a significant discount to the value of its property portfolio. Ultimate shares were up 10.5p to 276.5p.

The AIM-listed Renova Energy was also in favour as the company reported record monthly production of ethanol in December of 477 million barrels. Its stock has been boosted by recent changes to US energy policies, and the broker Ambrian urged clients to "buy", saying the stock was one of their favourites in the renewable energy sector.

Sticking with companies poised to cash in on demand for renewable energy, Enova, the hydrogen cell company was 23p higher at 391.5p a rise of 6.2 per cent. The company is thought to be on the verge of signing a big deal with Ford Motors.

The advertising and marketing group Ekay enjoyed another strong session as retail buyers continued to pile into the stock. The group confirmed its debut figures would be better-than-expected. Its shares rose 11p to 37.5p.

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