Market Report: GUS boosted by talk of bid for entire group

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The Independent Online

Having rejected one private-equity bid for Experian, its consumer credit rating agency, in March, GUS may be about to face a bid for the whole business including Argos and Homebase, according to the rumour in the market yesterday.

Traders said a number of buyout houses are running the rule over a bid for the entire group, with an eye to sell off the retail arms and keep the credit agency. GUS has already confirmed it will demerge Experian later this year, but private-equity groups may be prepared to bid for everything if, as appears to be the case, GUS is unwilling to sell Experian.

One trader said: "There would be no shortage of potential buyers for the retail businesses, and Experian is certainly valued at a significant discount to its US peers while still part of GUS. The sum-of-the-parts valuation and a break-up of GUS makes a compelling case for a bid, and an £11.7bn bid for the lot including debt, valuing the shares at about 1,135p, would probably not be out of reach."

Shares in GUS were well supported on the rumours, although volume of 8.9 million shares would indicate that not everyone was buying the story. GUS closed at 955.5p, a rise of 11p.

Despite overnight weakness in Asian markets London shares were strong all day, with oil and property stocks leading the FTSE 100 26.3 better at 5,678.6.

Confirmation that Shell is planning more drilling in the Arctic Circle sent the shares 26p firmer to 1,841p, with BP following on by ending 5.5p better at 618.5p. In the real-estate sector, Hammerson was 26p better at 1,139p as the non-executive director, John Hirst, topped up his holding.Land Securities was not far behind, adding 18p to 1,745p.

After topping the FTSE 100 leaderboard on Tuesday, there was more support for the tin can maker Rexam, as both Merrill Lynch and Teather & Greenwood upped their recommendation on the shares to "buy". The company also announced it is divesting three packaging plants - two in Scandinavia and one in England - with combined sales of £65m. Shares in Rexam were well bid again, adding 13.25p to close at 506.75p.

For the fourth session on the trot, takeover talk surrounded the Anglo-Dutch steel maker Corus, sending the shares soaring in early deals to 455p, up 26.75p. This time the rumoured source of a bid was the Russian steel group Severstal, which looks to have lost out on the takeover of Arcelor by Mittal. A bout of afternoon profit-taking saw the shares close up 5.75p at 434p. The stock has risen 44.6 per cent from a low of 300p in January.

Ashtead, the plant hire operator, was out of favour with investors despite reporting results that beat market expectations. The group, which was on the brink of collapse three years ago because of high gearing and questions over its accounting practices, reported full-year pre-tax profits of £81.7m, as sales rose 22 per cent. Traders put the fall, off 25.75p to 160p, down to profit-taking and said the shares should bounce because of the strong numbers and a positive trading outlook.

Another company that once teetered on the brink of collapse is Morgan Crucible, the engineering and materials group. Three years ago the shares were trading at little more than 30p but they have since recovered and added 19p yesterday to close at 246p. Brokers were impressed with a trading update, and a handful of positive notes pushed the shares higher, as Citigroup, ABN Amro and Numis waxed lyrical about the shares.

An encouraging drilling update from the gas storage group Egdon Resources excited traders. The company is drilling in Dorset to create storage caverns in salt deposits, and independent consultants have estimated that the project could create a storage facility with up to 250,000 cubic metres of space. The project could supply up to 20 per cent of the UK's current gas demand, and traders pointed out that a similar project with much smaller capacity was recently purchased by ScottishPower for £80m. Shares in Egdon closed 36p better at 134.5p, giving the company a market capitalisation of £76.8m.

Also among the star performers in the small-cap stocks was the miner Weatherly, as trading resumed after suspension in late April. The group confirmed the purchase of Ongopolo, a copper mining and smelting group operating in Namibia, after more than three months of negotiations. Market makers immediately marked the shares better, closing at 14.62p, a rise of 24.4 per cent.

Finally, an encouraging report from the small oil exploration and production group Equator Exploration appeared to go unnoticed. Equator has leased a platform to further develop its Bilabri prospect in Nigeria, which it expects to produce 30,000 barrels of oil per day by the third quarter of 2007. Despite the news, the shares fell 2p to close at 111p.

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