Market Report: GUS soars on talk of a record £11bn buyout bid

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Reports that GUS is being stalked by a consortium of private equity firms sent shares in the retail conglomerate to the top of the FTSE 100 gainers list yesterday. GUS jumped 42p to 930p after the magazine Retail Week claimed that a series of private equity companies and global banks are plotting an £11bn bid for the group.

Reports that GUS is being stalked by a consortium of private equity firms sent shares in the retail conglomerate to the top of the FTSE 100 gainers list yesterday. GUS jumped 42p to 930p after the magazine Retail Week claimed that a series of private equity companies and global banks are plotting an £11bn bid for the group.

Should such an offer emerge it would be the largest leveraged buyout in UK corporate history. According to the report, the bidding team will break up GUS once it has taken control by spinning off Argos and Homebase and listing its financial services arm Experian in the United States. The former chief executive of GUS Home Shopping, Alan Taylor, is said to be advising the consortium.

The retail giant is conducting its own strategic review which is tipped to recommend a break-up of the group anyway. Analysts believe that an offer is unlikely to emerge before GUS has released its important Christmas trading statement in the new year but took the view yesterday that raising the capital for such a buyout is certainly possible given the love of all things retail in the private equity community.

Meanwhile, GlaxoSmithKline put in a stellar performance, gaining 30p to 1,196p, thanks to Citigroup. The US broker urged investors to pile into the drugs giant and set a 1,400p price target. It believes that GSK's research and development operations are head and shoulders above its European and US peers.

There was nervous trading in Cairn Energy, down 69p to 1,362p, ahead of today's trading statement from the group. Cairn will update the market on progress at its vital Rajasthan prospect in India and, given the stock's present valuation, investors are hoping for some very bullish comments from the company.

Many expect Cairn to announce a series of new finds but analysts warned that should they not materialise the group's shares are likely to be heavily sold off. Numis Securities estimates that the oil and gas explorer has already reported discoveries totalling about 500 million barrels of oil but calculates that Cairn's current stock market valuation is also factoring in 300 million barrels of new discoveries.

Reuters gained 4p to 369.5p after SG Securities returned from a meeting with the group's management team in a bullish mood. The French broker said it now has greater confidence in the outlook for Reuters in 2005. BSkyB was not so lucky. The satellite broadcaster lost 7p to 556p on concerns that it may have overpaid for the television rights to England's domestic and international cricket. It is rumoured that Sky will pay more than £200m for the rights, thereby bringing an end to nearly 70 years of Test match coverage on terrestrial TV.

Rumours of consolidation among housebuilders sent the biggest players in the sector into orbit. Barratt Development rose 54p to 608.5p, Persimmon added 59p to 700p, Wilson Bowden jumped 97p to 1,160p, Bellway added 60.5p to 842.5p and Westbury improved 25.5p to 450p. The wider market gained 7, the FTSE 100 closing at 4,735.

Jarvis improved 2.5p to 14p on talk that the mysterious Investeringsselskabet Luxor investment group has been busy adding to its holding. At the last count it controlled 4 per cent of the troubled support services group. Although it is unclear who is behind Luxor, the firm made a name for itself by picking up a chunky stake in Ashtead when it looked as if the group was about to collapse. That investment paid off in a big way. The tool hire group not only survived but has seen its shares soar 440 per cent this year. Yesterday profit taking sent the shares down 2.5p to 79p after it unveiled strong interim results.

Petrel Resources crashed 51p to 46p on fears it has lost out to rivals in its bid to secure oil concessions in Iraq. The company is seeking clarification from the Oil Ministry of Iraq but investors worry Petrel is running low on cash. At the last count it had just €50,000 on its balance sheet.

Fortune Oil ticked 0.38p higher to 10p as tracker funds positioned themselves for the stock's inclusion in the FTSE All Share today. Screen, the developer of security systems, held steady at 1.62p after unveiling a £5.5m fund raising at 1p a share.

Finally, those investors who have followed director share buying at IndigoVision will have done well for themselves. At the start of the year, directors at the software group gobbled up stock at 39p a share. They repeated the exercise in June at 59p. Yesterday IndigoVision soared 9.5p to 82p after it disclosed the purchase of 100,000 shares at 73.5p each by three of its directors. Leading the way was Oliver Vellacott, the chief executive, who picked up 90,000. In October, IndigoVision boasted of falling losses and said it was moving towards break-even.

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