Market Report: Centrica flares up after talk of Russian gas bid

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The Independent Online

Investors were contemplating the prospect of British Gas falling into Russian hands yesterday, amid suggestions that Gazprom could be considering an £11bn-plus bid for the energy supplier's parent company, Centrica.

The speculation came after the Russian giant's deputy chairman said the company would consider acquisitions to take it into the business of supplying homes with gas and electricity. At the moment, Gazprom is a gas wholesaler only in the UK, with a few major industrial and power station companies. Centrica's British Gas is the nation's biggest supplier to individual homes.

Gazprom is believed to have looked at Centrica in the past and more recently considered gatecrashing the abortive acquisition of ScottishPower by E.ON of Germany. ScottishPower shares were also strong yesterday on hopes that Gazprom will alight on it as a suitable entry into the retail market, ending up 4.5p at 570.5p.

But it was Centrica which was most heavily tipped. Société Générale said its 52 per cent share of the retail energy supply market, its storage capacity and access to liquid natural gas terminals made it a better target. "Additionally, other potential bidders for Centrica are limited by competition issues, so a bidding war is less likely," SocGen said. Centrica shares jumped 6.5p to 258p, additionally buoyed by news it had scrapped some price promotions to help ease the profit squeeze it faces as a result of rising gas prices.

Other energy supply companies and the wider utilities sector were also in demand as a result of Gazprom's intervention. United Utilities, up 10p at 667.5p, and Scottish & Southern Energy, 16.5p sparkier at 1,062p, were among the big winners.

The FTSE 100, however, remained stubbornly in the red, as the crisis of confidence in the Japanese market and disappointing results from Intel combined to send global stock markets lower. At least the index rebounded from its low point, reflecting optimism for this morning's trading session. It closed at 5.663.7, down 35.3 points.

AstraZeneca was the worst performer, down 121p to 2,679p after overnight news that it had lost a US court battle to protect patents on its heart drug, Toprol. That exposes the drug, AstraZeneca's fourth-biggest seller, to copycat competition in the world's most profitable pharmaceutical market 18 months earlier than hoped.

Minerva, the property company planning a 53-storey tower in the City of London, was talk of the mid-cap list, soaring 16.75p. The gossip never coalesced around a single story. Some people had it that a wealthy Middle Eastern businessman was about to declare a large stake; some people had it that a private-equity firm would make an outright takeover bid; and still others had it that it had attracted an all-paper offer from one of the FTSE 100 property companies, interested in bulking up their portfolio of City sites ahead of a revival of the office rental market. Whatever, by the end of the day, everybody had it - and the stock had been chased up 16.75p to 290p.

Ryanair laid into ABN Amro after one of the investment bank's analysts sent the airline's shares lower by incorrectly warning that its schedules had been hit by widespread cancellations. Ryanair, whose shares fell 2.7 per cent at one point, said it regretted that such a "false and inaccurate rumour" had emanated from the bank. There were no inconvenienced passengers because Ryanair had withdrawn the flights a month ago when it knew a delivery of new aircraft would be late. The confusion arose because the flights showed up as cancelled on airport websites. Ryanair shares recovered to end down only 10 cents at €7.78.

Rentokil Initial, the rat-catching, toilet-cleaning support services giant, was sold down 4.5p to 155.5p after Investec argued that the company's restructuring could fail to yield the trading recovery that the market expects. The cruise ships business Carnival and British Airways were off 91p at 3,265p and 3p to 321.25p, respectively, as investors fretted that the recent oil price spike would lead to much higher fuel bills. And there was a bearish story doing the rounds on Invensys, the factory equipment maker, whose shares dipped 0.75p to 20.5p on rumours of a profits warning.

D1 Oils, which is trying to make diesel from the seeds of the jatropha tree, replaced its founding chief executive, Philip Wood, with a numbers man, the finance director Elliott Mannis, who the City thinks will make sure the company focuses more closely on generating early revenues. The stock, which has halved in three months, was back up 19p to 219p. Shares in Biofuels, a biodiesel refining company which D1 had previously considered taking over, was off 2.5p at 134.5p.