Market Report: Dealers build up hopes of a takeover for Amec

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The Independent Online

Just as with Sainsbury's, rumours of a bid for Amec simply will not go away. Yesterday shares in the construction group jumped 7p to 319p on talk that the company had received and turned down a 380p-a-share offer. Those who have piled into Amec will be hoping that the predator soon returns with a better offer.

Just as with Sainsbury's, rumours of a bid for Amec simply will not go away. Yesterday shares in the construction group jumped 7p to 319p on talk that the company had received and turned down a 380p-a-share offer. Those who have piled into Amec will be hoping that the predator soon returns with a better offer.

So who would want to buy the construction group? Market professionals reckon America's Fluor Corporation, which already has a joint venture with Amec in Iraq, would certainly be interested in the group. Bechtel, another US construction giant, is also often cited as a likely bidder for group.

When Amec posted interim results earlier this month, its management team did little to dampen the speculation. Sir Peter Mason, its chief executive, failed to categorically discount the possibility of a takeover when questioned on the topic, saying only: "We're interested in what's best for out shareholders." The fact that the hedge fund Tosca is now Amec's biggest shareholder is without doubt a major reason for the constant discussion of the company's future. Tosca is known to be an aggressive investor and one that is likely to put a company into play.

Meanwhile, the rumours have done wonders for Amec's share price, which has soared from the 260p level since the middle of August. In the absence of a bid, some brokers believe the group's valuation is now beginning to look a little rich.

Sainsbury's shares briefly hit a high of 297p but eased back to close 6p better at 283p. Traders continued to bet on a bid for the supermarket group as 116 million shares changed hands but there was a strong fear among bulls of the stock that the rumours will have subsided by the start of next week.

Compass fell another 8.75p to 230.5p as Merrill Lynch placed a line of 15 million shares at 234p on behalf of a client. Dealers talked of the sell order coming either from Vanguard Group or Artisan Partners. Both are fund management outfits. Also weighing on shares of the catering giant were downgrades from Deutsche Bank and Morgan Stanley in the wake of Thursday's profit warning. Deutsche cut its recommendation to "hold" from "buy" while Morgan Stanley moved to "equal weight" from "overweight". Elsewhere, BskyB rose 17p to 514p as Citigroup was heard ushering its best clients into the stock. It argued that the satellite broadcaster is well placed to meet challenges from rivals and from the UK regulator.

News that Merrill Lynch had removed Vodafone from its "Europe 1 List" of top stock picks failed to dent the mobile phone giant which finished the day 1.5p higher at 132.25p. Dresdner Kleinwort Wasserstein supported Vodafone by raising its earnings forecast for the group's current year. "The Vodafone story is improving in the near term," said the German broker, as it told investors to expect improving newsflow from the group's Japan operations in the coming months.

Those traders who were short of Luminar ahead of yesterday's trading update suffered some serious financial pain. They had been betting on a poor statement from the late night bars group, and a sharp drop in its shares price, but were sorely disappointed by news of a slight improvement in the group's business. Luminar jumped 35.75p to 444.75p, leaving bears out of pocket.

Lower down the pecking order, Oystertec rose 0.75p to 25.25p after announcing that its finance director, Adrian Binney, and his wife, Susan, had bought 30,000 shares at 25p. Abbot Group slumped 5p to 190p after Alasdair Locke, executive chairman at the oil services group, disclosed the sale of 11.3 million shares at 185p. The stock was placed with various institutional investors.

E-bookers jumped 18p to 248p on talk that its founder Dinesh Dhamija wants 300p a share in cash for his 41 per cent stake in the online travel group. On Thursday, E-bookers revealed that it is in takeover negotiations. Bridgewell Securities, however, urged caution, telling investors: "We believe that the list of potential bidders is not as long nor as deeply compelled to buy e-bookers as some press reports would suggest."

Celtic Resources gained 9p to 405p on rumours that a bullish announcement is just around the corner from the explorer. According to the gossip, Celtic's Nezhdaninskoye field in Russia contains a lot more gold than originally thought. Whispers that Yoomedia is close to securing a major new contract pushed its shares 2.5p north to 20.25p. Premier Direct improved 6.5p to 705p as a number of brokers were heard talking of strong trading at the group.

Finally, Smart Telecom made its debut on AIM yesterday. Seymour Pierce raised £10m for the group, which is Ireland's third-largest fixed line telecom provider, at 15p. The stock closed at 18p valuing the company at £33m. Smart will use the cash to expand its residential and broadband services in the Irish market.

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