Market Report: Hanson buoyed by cement deal speculation

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Hopes that the ongoing consolidation in the building materials sector will soon see someone making a move on Hanson drove shares in the group to the top of the FTSE 100 leaderboard yesterday. The excitement was caused by news of a takeover offer for Germany's HeidelbergCement and left Hanson up 17p to 539p.

Merger talk in the industry has been ignited by two large deals during the past year, both of which saw UK companies being swallowed by larger foreign players. In September, Mexico's Cemex bought RMC for £2.3bn while in January the Swiss cement maker Holcim acquired Aggregate Industries in a £1.8bn deal.

Analysts believe France's Lafarge is the most likely bidder for Hanson, although they argue that private equity firms, which these days are flushed with cash, cannot be written off as contenders. Of course, if a bidding war were to break out, an industry player such as Lafarge should easily outbid any private equity firm given the cost savings the French group would be able to generate.

Merrill Lynch was yesterday heard hinting to investors that Hanson could be the next domino to fall in the consolidation of the sector.

Elsewhere, Royal & Sun Alliance added 2.25p to 83.25p as Corvus Capital, Andrew Regan's investment vehicle, confirmed it is considering a bid for the insurer. On the whole, market professionals are sceptical that the controversial entrepreneur can raised the £2.5bn required to buy the company. "The obstacles to a potential deal are significant, and reflect the possible difficulty in obtaining finance and the well-known toxicity in RSA's US business," Numis Securities said. It urged investors to use any strength in the stock as an opportunity to reduce their exposure to the company.

BSkyB dropped 11p to 514.5p as investors continued to worry about the ability of the satellite broadcaster to retain the television rights to Premiership football. Sky's contract runs out in 2007. However, the team of media analysts at Numis Securities are doubtful that the group would fail to renew its contract with the Premier League.

The broker said: "BSkyB is the natural home for Premiership football and the rights are worth more to Sky than to any other broadcaster. With cable focussing its attention elsewhere and no way for Freeview or free to air broadcasters to monetise the rights as effectively as Sky, there is little doubt that the group will outbid its competitors."

O2 gave up 1.5p to 125.25p on rumours Hutchison Whampoa will soon expand its 3 mobile phone unit into Ireland. The Hong Kong group's presence in the UK has without doubt eaten into O2's profits and should it move into Ireland, O2's impressive earnings growth there would come under pressure. At the latest count, the mobile group generated 12 per cent of its earnings from across the Irish Sea.

Shire Pharmaceuticals put on 8.5p to 608.5p as Lehman Brothers told the market to expect pivotal phase three data within the next three weeks for the pharmaceuticals group's I2S drug against Hunter's syndrome. Given Shire's previously published data on I2S, the results are likely to impress, suggested the broker.

EasyJet came under heavy selling pressure at the start of the session but rallied strongly to close 9.5p higher to 257.5p. Dealers once again reported rumours that Icelandair, which controls 10 per cent of the company, is planning a bid for the low-cost airline.

Lower down the pecking order, Emblaze rose 0.5p to 167.5p after confirming it had signed a deal for the distribution of its mobile phone handsets with the Cauldwell group of companies. Stream, the mobile phone content group, firmed 1.75p to 58.75p on talk it is close to winning a large order from the US.

Mano River Resources ticked 0.25p higher to 10.5p after boasting that it has been granted a sizeable iron ore concession by the Liberian government. Should Mano decide to develop the site it will need the support of a major mining sector player. Iron ore mining is a capital-intensive business and is especially costly in Liberia given the West African country's limited infrastructure.

Finally, Libra Natural Resources rose 0.13p to 9.5p after appointing Peter Greensmith as chief executive. Mr Greensmith has 17 years' experience in the world of investment banking. Libra also said it has exposure to a 3.3 per cent stake in King Coal through a convertible loan note. King Coal owns several high -quality, thermal coal deposits in the US and word has it may soon be looking to list on AIM. Its other major shareholders are Cambrian Mining, which controls 55 per cent of the group, and Coal International, with 17.1 per cent.

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