Market Report: Centrica powers on, lit up by renewed bid talk

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The Independent Online

A slow trading session yesterday was enlivened by a handful of corporate activity rumours, with Centrica once again taking centre stage.

It is now almost three months since talk of a bid from Gazprom sent Centrica shares into orbit, and more bid talk, with the Russian giant the name still on traders' lips, sent the shares to the top of the FTSE 100 leader board. Although Centrica shares remain a long way off the 2 February mid-session high of 337.5p, when news of Gazprom's interest broke, the story will not die down.

Some traders believe that Gazprom is still weighing up a full bid for the group, even if there are likely to be some regulatory complications. More than 35 million Centrica shares changed hands as the stock closed at 304.25p, an all-time high closing price.

Meanwhile, traders hoping to see Imperial Tobacco bid for its Franco/Spanish rival Altadis, makers of the Gitanes cigarette brand, ended the day disappointed as the stock closed unchanged at 1,760p. One trader said: "This story is as old as the hills, and while it would not be a bad strategic move for Imperial it is likely to create a lot of opposition among Altadis shareholders."

In the broader market London shares drifted lower despite early gains in oils. Overnight weakness in Japan, as the Nikkei fell almost 500 points, didn't help matters. The FTSE 100 closed 34 points lower at 6,098.7, with some traders beginning to feel nervous over where the market goes from here. BP reports first-quarter results today but some profit-taking saw its shares close yesterday half a penny lower at 711.5p.

The hedge fund manager and commodity trader Man Group came in for some profit-taking after a stellar first four months of 2006, in which the shares have added more than 36 per cent. One trader said: "No matter how much you like this stock, and it is not short of fans, the price is up with events and in a nervous market is beginning to look expensive." Rivals Amvescap and Schroders also followed the market trend to go lower, with Amvescap losing 1.5p to 558.5p and Schroders falling 7p to close at 1,150p.

There has been plenty of corporate activity speculation at Abbot Group in recent weeks, with Halliburton rumoured to be about to bid for the company. But traders got it wrong as Abbot announced an agreed £247.2m bid for the Norwegian oil services group Songa Drilling. The broker Seymour Pierce applauded the move and investors bought the stock heavily, with more than 6 million shares changing hands as the price firmed 17p to close at 340p.

Among the smaller oil stocks, Mediterranean Oil & Gas was well bid as traders speculated that ENI, the Italian oil company, was poised to bid for the group to try to consolidate production on the Adriatic coast. The shares added 15p to close at 167.5p. Faroe Petroleum was also well bid again, adding another 11p to close at 179.5p as traders eagerly await news on the company's North Sea drilling projects. Bulls of the stock are expecting a "substantial" oil and gas find in its North Halibut project. The company raised £23.5m net via a placing at 136p less than two weeks ago.

GCap Media also succumbed to a bout of profit-taking after a speculative run fuelled by rumours of a private-equity-backed bid for the radio management company. Its shares have risen the best part of 20 per cent in the last three sessions, although the stock is still a long way from its five-year high of almost 900p. Traders decided that the management changes at Capital Radio last week, with Scott Muller from Nova radio station appointed as programme director, probably means that a bid will not come in the short term, sending the shares 7.5p lower to 255p.

In the small caps, the gas purification systems engineer QuestAir Technologies was the star performer after it said the oil giant Exxon Mobil has passed an internal review approving a large capacity hydrogen purifying project. The shares surged 36.5p in early trade, a leap of 59.3 per cent, before some profit-taking knocked them back to close at 85p, a rise of 23.5p.

The minnow Medal Entertainment & Media also enjoyed strong demand after it said that current trading was in line with market expectations. The stock has fallen from a high of 131p in January 2005 to as low as 38.5p at yesterday's opening. The trading statement tempted some retail traders into the stock, with more than 217,000 shares changing hands against an average daily volume of closer to 25,000. The stock closed 14.5p higher at 53.5p.

Finally, AIM investors will be on the lookout for Mobestar, a provider of 3G wireless application services, as it comes to the market today, after a placing at 100p by Midas Investment Management. The company is not raising any new funds.