Market Report: Close and Collins Stewart rise on takeover talk

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The Independent Online

The brokers were back in vogue yesterday, as one revealed it had received a number of bids, and a rival was talked up as a potential takeover target.

Close Brothers stormed to the top of the mid tier after it revealed it had received further approaches to the bid it rejected from Cenkos last month. The group soared 9.8 per cent higher at 950.5p. Also up strongly was Collins Stewart as talk intensified of takeover interest from an unnamed suitor. It closed up 8.4 per cent at 180.5p. Last month, Collins Stewart was rumoured to be running the slide rule over Evolution Group.

Sitting proudly at the top of the blue chips on Friday night was Northern Rock. It has been a tough week for the beleaguered lender, but it strengthened 6.9 per cent to 91.9p on talk that Olivant had been persuaded not to walk away from the table.

There was a 3.4 per cent bounce in Rentokil to 118.2p after Thursday's pasting in the wake of a profits warning. The move was not just of the "dead cat" variety, as two brokers threw their weight behind the stock. Exane raised its rating to "outperform", while Evolution upped its to "add", saying it had been oversold.

A better than expected trading update helped lift Centrica 1.85 per cent to 369p. The company did not warn on profits, saying it had "performed well in 2007 although market conditions have become more challenging in recent months as wholesale gas prices have risen".

As expected, the market rallied 50 points in the morning after the previous day's bloodbath, but as the session wore on, confidence ebbed. Despite falls on the Dow, the FTSE 100 ended in the black, 32.8 points higher at 6,397.0.

The miners were the worst, smashed by a note from Goldman Sachs yesterday. Antofagasta led the market down, falling 4.3 per cent to 702.5p after the broker said it had reduced base metal price forecasts significantly for the first half of 2008. It downgraded the sector to "neutral" from "attractive".

It added Vedanta Resources to the "conviction sell" list, sending the stock down 1.4 per cent to 2,109p.

Also on the downside, retail and housing stocks were weak. Real estate investment trust Hammerson was the biggest hit, down 3.0 per cent to 968p.

HBOS continued to suffer after investors reacted badly to its in-line trading update on Thursday. It fell a further 1.1 per cent to 756p as Citigroup cut its rating to "hold", citing the headwinds facing its UK retail and corporate divisions.

Second string risers were topped by Northern Foods in the morning, after it announced it was to launch a share buy-back programme for 5 per cent of its shares. The group rose 9.0 per cent to 91p.

GKN rallied after slumping to be the mid tier's worst performer on Thursday. The automobile to aerospace group fell in the wake of a trading statement but strengthened 3.2 per cent to 294.5p after support from ABN Amro. The Dutch broker initiated coverage with a target price of 350p and a "buy" recommendation, saying it had "above automotive industry average growth prospects".

On the downside, Burren Energy fell as Korea National Oil Corporation (KNOC) walked away from a counter bid. Burren recommended a 1.74bn offer from Eni, the Italian oil and gas giant, at the end of November and the shares continued to rise on the hope of a rival bid from KNOC. Burren shares fell 15p to 1,213p as the Korean group released a statement saying it was "no longer considering making an offer".

In the wider market, the rumours of an imminent bid for Inspicio proved correct, as an investment vehicle backed by 3i Group, the private equity house, agreed a 228m deal. It rose 11.1 per cent to 220p.

The Lloyds of London insurance company Kiln leapt earlier this week and was forced to put out a statement saying it was in takeover talks. The stock rose a further 12.8 per cent on the news that Japanese companies Millea Holdings and Tokio Marine had agreed a 442m deal. It closed at 145.5p.

On the slide was Burst Media Corporation, after it warned on profits. The internet advertising group slumped 20.9 per cent to 8.5p as it said full-year results would be below market expectations after the loss of key accounts and lower advertising revenues than expected.

Also down was Wolfson Microelectronics after Goldman Sachs slashed its rating. The powerhouse broker cut its recommendation to "sell" and lowered the target from 280p to 180p. It fell 9.4 per cent to 198p.

One trader said the 8.7 per cent fall in Inspired Gaming Group, to 258p, does not bode well for its potential takeover by the Icelandic investment company FL Group. "The market thinks the deal is unlikely, there are rumours of potential issues with the bid," he said.