Market Report: Geest in focus after fund raising by Bakkavör

Click to follow
The Independent Online

Bid fever surrounded Geest again yesterday and sent shares in the food producer up 20.5p to a four-month high of 570p.

Bid fever surrounded Geest again yesterday and sent shares in the food producer up 20.5p to a four-month high of 570p. The excitement seems to have been caused by a note from Citigroup in which the US broker argued that a takeover of Geest by its 20 per cent shareholder, Bakkavör, looks increasingly likely after the Icelandic group received approval from shareholders for an equity fund raising last week.

Bakkavör now has the green light to raise up to £150m, although the company's management have been coy regarding how they intend to deploy the cash. Lydur Gudmundsson, the company's chief executive, was reported as suggesting yesterday that the money may be used for acquisitions in "core markets" or to "strengthen the balance sheet".

Citigroup, which believes investors should buy into Geest, calculates that Bakkavör would need £360m to acquire the remaining shares in Geest that it does not already own. The difference between this figure and the £150m it is mandated to raise through a rights issue would have to be made up by borrowing. Although this would leave Bakkavör with a higher-than-expected debt burden, it is certainly within the group's capabilities, according to Citigroup.

The Icelandic food producer built up its 20 per cent holding in Geest in June. At the time, it indicated its interest was merely for investment purposes. This prohibited Bakkavör from tabling a bid for Geest within the next six months. However, this period is due to expire at the end of the month, leaving it free to pounce on the UK player.

Among blue chips, Kingfisher was in demand, rising 6p to 312.75p, as Dresdner Kleinwort Wasserstein urged its clients to switch out of Dixons and into the DIY giant. According to Dresdner, Kingfisher offers better near-term growth prospects than Dixons, up 1p to 174p. Meanwhile, the FTSE 100 had another good day, rising 19.4 points to 4,693.2, as the price of oil retreated. The best performers in the index were Amvescap, up 8p to 308.5p, Hilton Group, up 6.25p to 267.5p, and Pearson, up 13.5p to 614.5p.

The combination of the falling crude price and forecast-beating figures from Ryanair, up €0.67 to €4.68, helped easyJet rise 11p to 170.5p and British Airways improve 2.75p to 218.75p. A series of brokers said they planned to upgrade Ryanair in the wake of the numbers.

Next, up 12p to 1,698p, saw its product director, Christos Angelides, exercise options over 25,000 shares at 530p and then sell the stock at 1,675p in the market. Mr Angelides netted £286,000 from the share trade. SABmiller put on 8.5p to 800p after Deutsche Bank tipped the brewer's upcoming interim results to be an upbeat affair. "The results are likely to show another period of strong earnings growth driven principally by the strength of the South African economy," the German broker said. Credit Suisse First Boston also put its weight behind SAB stock ahead of the 18 November figures and lifted its price target to 875p from 785p.

Wincanton rose 8.5p to a new high of 262p in brisk trade, as market professionals talked of a possible bid for the logistics group. They suggested that the Swiss-based sector giant Kuehne & Nagel is the most likely predator. But not all were convinced of the bid story. An alternative explanation for yesterday's interest in Wincanton suggested that the UK group is close to securing a major new business win.

Concerns about trading at Floors 2 Go has weighed heavily on its shares. Since the floor covering group's May high it has lost one-quarter of its value. But yesterday the stock rallied 2p to 56p after reassuring comments from Numis Securities.

The broker believes that the Floors 2 Go is trading well and is convinced that it will not disappoint the market. Numis argued: "Its last quoted like-for-like figures were for the nine weeks to the end of August and they revealed growth of 22 per cent. Given our views of the market now, we would not be surprised if the company's second-half performance was at least as good as this now - possibly even better."

Matrix Communications, which recently executed a 40-for-1 share consolidation, added 21.5p to 147p as investors woke up to the fact that the IT services group announced a 450 per cent jump in sales in a trading statement on Monday. Matrix also promised to start paying dividends next year, which is not bad going for a company which was created just 18 months ago.

Tenon ticked 1p higher to 33.5p after a plethora of director share purchases, while Ashtead climbed 0.5p to a new high of 68.75p as investors remained convinced that business is booming at the tool hire group.

Market Movers

↑ Amvescap 308.5p (up 8p, 2.7 per cent). Upbeat comments from Lehman Brothers help the stock.

↑ ICI 215.5p (up 2.25p, 1.1 per cent). The rising oil price is great news for the chemicals sector.

↑ Northgate Information Solutions 65.5p (up 3.5p, 5.7 per cent). Appoints Evolution Beeson Gregory as joint corporate broker.

↑ Dimension Data 30.5p (up 1p, 3.4 per cent). Traders bet that results from the group this month will impress the City.

↑ Cheerful Scout 1.12p (up 0.37p, 49.3 per cent). Stuart Appleton, the chairman, buys 250,000 shares at 1p.

↑ QA 2.87p (up 0.5p, 21.1 per cent). Says its operating performance is improving despite competitive market conditions.

↑ Zari Resources 2.5p (up 0.25p, 11.1 per cent). Announces plans to raise £1.6m via a placing of 112 million new shares at 1.5p.

↑ Innovision Research & Technology 82.5p (up 7.5p, 10.0 per cent). Reports the retirement of Andy White as an executive director at the company.

↑ Berkeley Technology 13p (up 1p, 8.3 per cent). Annual losses narrow as the company focuses on its venture capital and consulting business.

↓ J Sainsbury 261.75p (down 5.5p, 2.1 per cent). Traders take profits as bid speculation wanes.

↓ Marks & Spencer 359.25p (down 4.75p, 1.3 per cent). Bear raiders attack the stock with various false rumours.

↓ RAC 640p (down 26p, 3.9 per cent). Brokers slash their forecasts amid worries of a possible rise in insurance regulation costs.

↓ Great Portland Estates 301.5p (down 3.5p, 1.2 per cent). Sells one of its Bond Street properties for £50m.

↓ Catalyst Media 6p (down 0.75p, 11.1 per cent). Paul Curtis, the value investor, sells down his stake in the group.

↓ iTrain 8.5p (down 1p, 10.5 per cent). Announces that it is in "advanced discussions" concerning an acquisition.

↓ Matalan 225.25p (down 2.5p, 1.1 per cent). Profit taking after robust interim results.