Market Report: Corus jumps on talk of a bid from Russian rival

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The Independent Online

Corus, the former British Steel, could become the target of an audacious bid from a cash-rich Russian steel company, if a new analysis of the sector proves correct.

Corus, the former British Steel, could become the target of an audacious bid from a cash-rich Russian steel company, if a new analysis of the sector proves correct.

Speculation that the icon of British industry could become a takeover target sent its shares higher yesterday. Traders were responding to a note from the French broker Exane-BNP-Paribas, which tipped Corus as the most attractive play from a mergers and acquisitions point of view.

The thesis is this: steel producers in the developing world are under pressure to participate in tie-ups with integrated steel firms in emerging markets. This way they can resist the squeeze on profitability from rising raw materials costs and increased steel production in China. Exane advises investors to "watch out" for Russian companies with a lot of cash to spend, particularly the giant and acquisitive Severstal.

Corus, whose shares have lost almost one-quarter of their value in a fortnight, bounced sharply yesterday. As well as the takeover thesis, it also benefited from rumours that the steel business of ThyssenKrupp, the German industrial giant, is readying some forecast-busting interim figures. Corus shares closed up a penny at 43.25p

The FTSE 100 ended the week at 4,801.7, off 1 per cent over the past five sessions but up 11.5 points yesterday.

The gathering concerns over the global economy and the caution of the UK consumer has continued to take its toll this week. Many of the big retailers have borne the brunt, but some traders were taking advantage of the share price falls to snap up some perceived bargains yesterday. Next was back up 15p at 1,478p after Deutsche Bank, despite cutting its sales and profit forecasts for the company, reiterated its buy recommendation. Woolworths recovered 0.75p to 36.5p, with Signet, the jewellers, back up 1.75p at 101p. And Dixons did best of all, up 3p to 142p. The electrical goods retailer told shareholders that it would be weighing into the market to buy back its own stock, a move that boosts earnings per share and ought to support the share price. Unusually, the company has dispensation to carry out the buy-backs during its close period, where it is calculating its financial results for the year to 1 May.

Wolseley, the plumbers merchants, was near the bottom of the FTSE 100 performance table. The company has taken analysts to see its operations in Paris and Lille, and they have come back broadly positive on the opportunities for improving profit margins throughout Wolseley's Continental businesses. However, most analysts' reports yesterday contained a worrying line about a slowdown in its UK business, which is heavily exposed to the housing market. Its shares were off 15p at 1,048p.

Of the blue chip stocks, only Scottish & Newcastle did worse, falling 9.5p to 453.25p. Disappointing results from Molsen Coors Brewing put the spotlight on the sluggish beer market in the West. Shares in SABmiller were also down sharply at one point, recovering to close a ha'penny lower at 774.5p.

IMI, the engineering group whose wide list of products includes drinks dispensers and fluid valves, were up 10.25p to 397.5p. CSFB was pushing the stock yesterday, saying that IMI's disposal of its Polypipe business could yield more cash than the market is expecting, and that the share buy-back scheme will support the price, too.

Biofuels Corporation, whose plans to build one of Europe's largest biodiesel plants have fallen a month behind schedule, said that its potential customers in Germany have told it they will not pay the price for the biodiesel which the company had originally expected. That sent Biofuels' shares down 42p to 169p, but it also hit D1 Oils, which is also developing biodiesel production. It fell 15p to 335p.

Roc Oil was up 2p to 74.5p after an investment magazine tipped the shares. The company's geographical spread of exploration assets - in the UK, Mauritania, Angola, New Zealand, Australia, Equatorial Guinea and China - has attracted punters unwilling to take the greater risk involved in investing in smaller natural resources stocks.

Two new cash shell companies began trading on the AIM market, having raised the minimum £3m required for admission. Stockbroker Dusko Lukic's Draganfly Investments, which is looking to take stakes in quoted or soon-to-float companies in the "natural resources, consumer products, technology and services sectors", rose from a placing price of 3p to 3.62p. And Inspicio, formed to buy testing and inspection companies, rose from its placing price of 100p to 112.5p.

Finally, vague rumours of a bid for Manganese Bronze drove the taxi manufacturer's shares up 3p to 214.5p.

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