Market Report: Dutch bid talk fails to boost Friends Provident

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The Independent Online

In a market that once again made a sharp move to the downside, takeover rumours fell on deaf ears. Friends Provident, the life assurance and pensions group, is rumoured to be a target for the Dutch rival Aegon, in a bid that traders said could value the company at up to 210p per share.

In light of current volatility, many traders believe corporate activity will be put on the back shelf until the autumn, but in a strong market for life insurance stocks bulls believe a bid will come sooner. One trader said: "Aegon has indicated it wants to gain a much bigger foothold in the UK life market and is targeting 10 per cent. The best way for them to do that, and in some ways the cheapest, is to buy Friends Provident." Despite the rumours, Friends Provident was unable to defy gravity and ended the session 2.25p weaker at 175p.

Elsewhere in the blue-chip stocks, Cairn Energy was the only triple-digit loser, declining 104p to 2,083p as oil ticked to less than $70 a barrel once again. Excitement over the company's decision to demerge its Indian operations has dried up since the Bombay exchange dropped more than 10 per cent on Monday and traders spent the session taking their money off the table.

There was muted buying interest in the airport operator BAA as a large, June call purchase of 850p went through on the London options market. The Spanish suitor Ferrovial made an official 810p approach last week, which BAA rejected as too low. Some traders believe the offer was merely an opening gambit from Ferrovial and its partners, and that another bid closer to 900p will be made sooner rather than later. BAA closed 2p cheaper at 834p.

London shares were weak in spite of a decent opening on Wall Street, as the Dowclimbed 44 points in early deals. Once again, the mining sector bore the brunt of London selling, although the market was sold across the board. However,most stocks held on to some of Tuesday's gains. The FTSE 100 closed the session 91.6 weaker at 5,587.1.

Leading a group of only six gainers in the FTSE 100 was Scottish Power, 10.5p better at 553.5p, as the broker Dresdner Kleinwort Wasserstein upgraded the stock to "add" from "hold" on good full-year results. The company's pre-tax profits hit £675m with earnings per share of 44.1p, well ahead of consensus forecasts. The group also gave the market a positive outlook statement for the rest of 2006.

In the second-line stocks, the property group Great Portland Estates followed the rest of the sector by confirming it will seek Real Estate Investment Trust status. Results showed a 29.7 per cent increase in net asset value to 437p per share, in line with bumper results reported by the rest of the sector, as the company benefited from a strong performance in West End property prices. The shares improved 3.75p to 457.25p against a falling market.

ISoft, the struggling healthcare software group, closed 3.75p weaker at 93.75p as rumours once again circulated in the market that it is poised to launch a deeply discounted rights issue. Traders sold the stock as brokers said a rights issue may have to be priced at somewhere near 65p if the group is to convince investors to back it after a series of disastrous profits warnings.

The pub landlord Mitchells & Butlers was back in focus before first-half results due today. Traders expect a solid set of figures, with some expecting another bid for the company three weeks after a group led by the property tycoon, Robert Tchenguiz, decided against making a formal offer. Mr Tchenguiz offered 550p per share for the group and although he has said he will not raise his bid, there was some talk that a private-equity group may be preparing a better bid. M&B shares closed at 481.25p, up 11.5p.

In the smaller companies, Plectrum Petroleum was well bid, closing 1.37p better at 16.62p, as the company announced a fundraising that will net it £2.5m of new capital. Market makers reported strong support for the placing, at 14p per share, as a rumour did the rounds that Plectrum will announce a major acquisition in Tunisia next week.

There was also heavy volume in the software group Synchronica, with more than 7 per cent of the company's shares changing hands, prompting rumours of a mystery investor building a substantial stake in the company. The shares edged 0.5p better to close at 21.5p.

Finally, despite the extremely volatile equity markets, the broker Ambrian Partners has raised £16.8m in an institutional placing of shares in Monto Minerals, which is due to start trading on AIM today. The shares were placed at 12p giving the company a market capitalisation of £22.7m. Monto is a producer of industrial minerals and has operations in Queensland, Australia.

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