Market Report: Exel makes outstanding bid target, say traders

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Investors were stacking warehouses full of Exel shares yesterday, convinced that a predator was about to make a move on the logistics giant. The excitement left the stock as one of the best performers in the FTSE 100, up 36p to 782.5p.

Investors were stacking warehouses full of Exel shares yesterday, convinced that a predator was about to make a move on the logistics giant. The excitement left the stock as one of the best performers in the FTSE 100, up 36p to 782.5p.

Analysts have for a long time argued that the sector is ripe for consolidation and yesterday tipped Deutsche Post or the American postal giant UPS as the most likely buyers of the company. A tie-up between Exel and another UK-based operator is seen as very unlikely on competition grounds, but a deal with either Deutsche Post or UPS will almost certainly be waved through by regulators.

One factor that could prevent the German group from pouncing on Exel is the fact that the company may still be busy trying to digest its recent acquisition of a local rival. Meanwhile, UPS is known to be having a tough time of it. Back in December, the US group issued a profits warning blaming a sharp drop in domestic shipping volumes. However, a tie-up with Exel would generate substantial cost savings and could help reverse the group's fortunes, argued analysts.

Elsewhere in the UK logistics arena, Business Post, which was last week being bandied around as a takeover target, rose 4p to 667p while Wincanton added 4.5p to 289.5p.

Lloyds TSB, up 14.75p to 486p, was flavour of the day in the banking sector for the second successive session as takeover speculation once again swirled around dealing rooms. Spain's BBVA was talked of as a possible predator. Dealers traced the takeover speculation back to the derivatives market, which saw strong demand for Lloyds TSB call options. These allow the buyer to make a handsome profit from a sharp rise in the bank's stock price, such as that traditionally seen in the wake of a bid approach, with a relatively small outlay of cash.

Also supporting Lloyds was an upgrade to "buy" from "hold" at ING. The broker argued that the bank's dividend has become increasingly secure of late and even suggested that a share buy-back programme is a possibility at the group. Meanwhile, HBOS rose 16.5p to 856.5p, Royal Bank of Scotland added 3p to 1,762p and Barclays improved 4.5p to 584p.

The wider FTSE 100 index roared 30.7 points higher to 4,843.2 mirroring strong gains by stocks on Wall Street following better-than-expected US consumer confidence figures. According the latest data, corporate America also seems to be in good health as Merrill Lynch and Johnson & Johnson posted robust earnings.

BAE Systems gained 4.25p to 242p as Credit Suisse First Boston named the company as its top pick in the aerospace sector. CSFB believes that the upturn in the industry is gathering pace and expects the sector to do well up until 2007. Stanley Leisure, steady at 416p, saw the Malaysian conglomerate Genting Berhad raise its holding in the casino's operator to 12.7 per cent.

Northumbrian Water rose 2.75p to 186p after Standard & Poor's upped its rating on the group's debt. "The move results from the ongoing improvement in the Northumbrian's financial profile and liquidity," said the credit ratings specialist. The group has done well from last year's review by the water regulator Ofwat.

Photo-Me gained 5p to 96.5p after the photo booths operator was heard to have held a series of reassuring meetings with institutional investors. There have been some worries of late that the group may struggle to meet City profit forecasts but Photo-Me seems to have been able to brush these aside. Stagecoach, up 1.25p to 113.25p, saw its rail director, Graham Eccles, bag £240,000 by cashing in various share options at 112p a share.

Clinton Cards was pegged at 103.5p as Don Lewin, its chairman, sold 2 million shares at 102p. Even after the disposal, Mr Lewin holds 31 million shares, or 15.2 per cent of the company.

Imagesound was unchanged at 27.75 despite talk that the group has won a major contract, while Hitachi Capital improved 6p to 241.5p on talk of strong trading at its consumer finance division. Yet more director share buying at Capital Management and Investment pushed its stock 1.25p better to 14.25p. Marc Jonas, a non-executive, picked up 830,000 shares at 12.3p taking his holding up to 9.3 million, or 3.9 per cent of the company. This follows last week's purchase of 200,000 shares at 12.3p by Tim Woodcock, CMI's finance director.

Finally, Phytopharm dropped 7.5p to 197.5p amid whispers the group is putting the finishing touches to a fund raising. Shares in the biotech have been a star performer since last month, when the group unveiled a licensing deal with Unilever for its P57 anti-obesity product. P57 is an extract of hoodia, a rare cactus eaten by the San bushmen of southern Africa to stave off hunger.

Market Movers

↑ Cable & Wireless 119p (up 6.25p, 5.5 per cent). The telecom group's third-quarter trading statement pleases the City.

↑ British Airways 250.5p (up 5.5p, 2.2 per cent). Credit Suisse First Boston raises its earnings forecasts ahead of next month's third-quarter results from the airline.

↑ Aviva 639p (up 19p, 3.1 per cent). Unveils better-than-expected new business figures.

↑ Icap 277.5p (up 11.75p, 4.4 per cent). Vague takeover speculation again boosts the stock.

↑ Invensys 20p (up 0.75p, 3.9 per cent). Dealers report solid institutional demand for the stock.

↑ Newmark Security 1.82p (up 0.23p, 13.8 per cent). Returns to the black at the interim stage and issues a bullish outlook statement.

↑ Silvermines Media 6.75p (up 0.75p, 12.5 per cent). Investors await the cash shell's first acquisition.

↑ Trio Holdings 28.25p (up 3p, 11.9 per cent). Investors get a chance to respond to Monday's late news of a bid approach for the company.

↑ World Television Group 1.5p (up 0.13p, 9.5 per cent). Unveils a series of senior management appointments.

↓ Wolseley 1,056p (down 21p, 1.9 per cent). Merrill Lynch urges its clients to sell the stock.

↓ Marconi 576p (down 14p, 2.4 per cent). News of a £150m contract win fails to boost the stock.

↓ SSL International 320.75p (down 7.25p, 2.2 per cent). Bid rumours subside.

↓ Scott Tod 39p (down 12.5p, 24.3 per cent). Warns that its second-half results will fail to live up to expectations.

↓ Sanctuary Group 40p (down 6.75p, 14.4 per cent). Issues a profits warning.

↓ Ricardo 266.5p (up 9p, 3.5 per cent). Takeover speculation drives share in the engineering consultancy higher.

↓ Rio Tinto 1,660p (down 30p, 1.8 per cent). Profit taking after recent strong gains.

↓ Alterian 107p (down 2p, 1.8 per cent). Profit taking after third-quarter results.