Market Report: Geest rises as traders make a meal of rumours

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The Independent Online

Geest, the maker of ready-meals and salads, was top of the stock market menu yesterday amid speculation that its leading shareholders have been offered 575p a share for their stakes, which would be a 10 per cent premium to the current price.

Geest, the maker of ready-meals and salads, was top of the stock market menu yesterday amid speculation that its leading shareholders have been offered 575p a share for their stakes, which would be a 10 per cent premium to the current price.

The rumours started early in the day and continued throughout trading to leave Geest shares top of the FTSE 250 risers, up 25p at 520p.

A secondary rumour was that management themselves were considering an offer, but that was ruled out by more seasoned observers. They pointed out that the company was only last week buying back its own shares. That would be against the rules if anything had been afoot.

Indeed, by the end of the day, a flurry of competing rumours had sprung up. Some thought the sale of a single division was around the corner. The divergence of opinion left cynics to suggest investors ought to be careful of this stock in coming days, fearing a ramp.

However, there is some plausibility to the story. Geest has strong cashflow and therefore could be attractive to private equity or a bank-backed bid. The acquisitive Icelandic conglomerate Baugur and its countrymate Kaupthang Bank were names being touted as potential bidders or stake builders yesterday.

Brokers such as Cazenove have argued recently that Geest shares are worth investing in as the convenience food market enjoys long-term growth.

The FTSE 100 never managed to get into positive territory, but it ended down just 10.9 points at 4,418 thanks to marginally improved consumer confidence figures in the US.

The stand-out sector was property, with above-expectations results from British Land (up 17.5p at 660p) sparking a wave of buying of its FTSE 100 rivals too. Land Securities, which posted an improved net asset value last week thanks to its retail assets, was the best blue chip performer, up 32p at 1,120p, chased by Liberty International, a shopping centre specialist, which closed up 8p at 734.5p. On the second line, Quintain Estates was 18.5p better at 394p; Brixton was 6p firmer at 282p; and Hammerson rose 10p to 656.5p.

Worries over falling margins and the competitive environment in Japan pushed Vodafone shares lower, despite the promise of higher returns of cash to shareholders. That only prompted comparisons with the high-yielding BT Group, which has been back in favour since its results last week. As Vodafone fell 6.75p to 128.75p, BT inched up another ha'penny to 181p.

Dealers were mystified by the 42p fall for Galen shares, which ended at 720p. The Northern Ireland drug maker, which is changing its name to that of its US subsidiary, Warner Chilcott, has been under downward pressure since revealing earlier this month that it has given up active promotion of its pre-menstrual tension drug Sarafem, which it bought for $295m last year. A revival of sales growth for the product is 18 months away, when the company ought to have come up with a new, improved version.

There was heavy trading in Highland Gold Mining on the back of reports at the weekend that its purchase of a gold mine in the Russian governorship of Roman Abramovich is being investigated by the country's independent Audit Chamber. The Independent on Sunday reported allegations that it was an Abramovich company which sold the mine, and that the governor used public funds to facilitate the deal. Highland Gold shares were initially down 2.5p but closed level at 242.5p.

Monterrico Metals jumped 27p to 326p after effectively hoisting the "for sale" sale sign over the company. It has appointed HSBC to examine strategic options for its Peruvian copper project and the company as a whole. And Prezzo, the Italian restaurants chain, was up 5p to a new high of 127.5p on expansion hopes.

Investors were betting again on a future profit warning from Character Group, the digital cameras, toys and gifts group. Stung by the fall in its shares, the company restated its guidance of last month, saying that sales of its £80 dancing robot, Robosapien, which is launched on Friday, and other new products will ensure full-year profits are no lower than last year. Despite more company share buy-backs, the stock closed down 7.5p at 81.5p.

Vernalis, the former British Biotech, hit a low for the year, falling 3.5p to 48.5p. A rights issue is on the way to help pay for the $50m re-acquisition of rights to its main drug, a migraine pill ­ and short sellers are pushing the stock down before the fundraising. The company might want to wait a little longer before going ahead, though. Analysts say they are awaiting details of a collaboration with a big pharmaceuticals company next month.

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