Market Report: Cadbury's slides as demerger hopes lose fizz

Such talk is bad news for all those hedge funds who have piled into the stock on the back of the break-up story. Panmure predicts that Cadbury shares, down 1p to 554.5p, will come under selling pressure over the coming days as many of those investors exit.

The break-up speculation seems to have been prompted by last month's decision by Cadbury to sell its European beverages division, which houses brands such as Orangina and Oasis.

According to Panmure, Mr Stitzer has made it clear that he plans to create shareholder value by implementing a sustained improvement in sales growth for the next three to four years. But the broker worries that Cadbury will struggle to generate growth at its US beverage business, despite this year's success of Dr Pepper Cherry Vanilla. Should this prove to be correct it will certainly weigh on Cadbury shares. The business accounts for 40 per cent of the group's profits.

Elsewhere, Sage rose 8.5p to 226.5p after Citigroup upgraded its stance on the software developer to "buy" from "hold". The move came before today's trading statement from Sage, which Citigroup expects to be a generally positive affair. Hilton Group fell 6.75p to 338.75p as analysts urged investors to cash in their chips after Friday's 14 per cent share-price jump in response to a bid approach from Hilton Corp, its sister company. Paul Leyland, at Seymour Pierce, believes there is little possibility of a counter-bid for Hilton Group.

Wolseley added 1p to 1,149p as word spread that the group is among several bidding about £1bn for the Swedish industrial products supplier Ahlsell. The UK building-materials titan is said to be up against a handful of private-equity firms in an auction which is nearing its final stages.

However, Dresdner Kleinwort Wasserstein argues that the £1bn price tag attributed to Ahlsell, which supplies products ranging from pipes and valves to cables, is too high. The German broker said: "We believe Wolseley is unlikely to buy Ahlsell for £1bn. Strategically, the deal makes sense but an acquisition price of about £500m would be more likely." The wider FTSE 100 rose 11 points to 5,286.

Aegis, off 5.5p to 127p, disclosed that Vincent Bolloré had raised his stake in the media group to 17.4 per cent. Dealers said he was busy adding to his holding yesterday, and most in the market expect the French financier to take his stake right up to 29.9 per cent in the near future.

Meanwhile, Maurice Levy, the chairman of Publicis, the advertising group, said he would not pay more than 140p a share for Aegis. He told the French press the UK group is not indispensable for the future of his company. M. Levy said: "Neither today nor tomorrow would we pay more than 140p a share."

SkyePharma fell 1.5p to 35.5p although directors at the biotech continued in their attempts to bolster the group's flagging share price by adding to their shareholdings. Yesterday it was the turn of Donald Nicholson, the finance director, who picked up 100,000 shares at 35p.

JJB Sports dropped 4.75p to 170.25p as Teather & Greenwood told its clients last week's stake building by Mike Ashley, the owner of its rival Sports Soccer, is merely for investment purposes. Some had hoped Mr Ashley might be tempted to buy the whole company after news broke on Friday that he bad picked up a 10 per cent shareholding in JJB.

GCap Media jumped 23p higher to 331.25p on rumours the radio group could soon receive a £700m offer from the buyout firm Cinven. London Stock Exchange rallied 3.5p to 537.5p, despite reports that Macquarie Bank has approached Spirit with a view to tabling a bid for the pubs operator.

The Australian bank also said it might buy the LSE but analysts warn that it does not have the firepower to execute both deals. Over the past week, LSE shares have fallen by about 10 per cent as many investors have given up on waiting for Macquarie to table its offer for the bourse.

Among smaller companies, takeover rumours boosted Gaming VC, 12.5p higher to 488p. Gossips reckon Sportingbet, 13p lower to 276p, is running the slide rule over the group. Landround added 4.5p to 119.5p as three directors at the voucher promotions group spent £15,000 on buying stock. Innovata ticked 0.5p higher to 26p on talk the biotech is close to securing a global licensing deal for its Adept adhesions product.

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