Market Report: Heineken bid rumour puts fizz into S&N shares

Talk of a bid in the brewing sector has been rife in recent weeks but until yesterday not much money was on Scottish & Newcastle being the target. However, shares in S&N soared more than 12 per cent on talk that its larger Dutch rival Heineken is mulling a hostile bid.

The word among traders is that Heineken is more interested in the group's 50 per cent stake in the Russian brewer BBH than in the rest of the group. Heineken has hinted in the past that it has little interest in the UK beer market, and most of the growth in the global market is to be found in emerging markets.

However, some brokers believe a bid for S&N would run into myriad competition issues and many traders believe the story is little more than hype. That said, almost 45 million S&N shares changed hands, sending the stock 64p better by the close to 595p.

Not surprisingly, the interdealer broker ICAP confirmed that trading volumes surged during the recent period of market volatility. The shares, however, dipped 4.25p to 523.75p as investors took profits. Some traders were disappointed that the rise in volume will not translate into an increase in forecasts.

The advertising and marketing giant WPP Group made a small acquisition, picking up the US survey consulting group Foresight International for an undisclosed fee, but traders were unimpressed, sending the stock 9.5p lower to 772p by the close. Meanwhile, the broker Collins Stewart reiterated its bullish guidance on WPP and upped its target price to 940p, telling clients: "You should own this one."

Bill Barnard, Dresdner Kleinwort's highly rated 3i analyst, upped his target for the private equity group on news that the company will return £800m to shareholders, probably via an issue of B shares. Dresdner upped its target price for the shares to 1,270p. The shares rallied strongly in early trade, hitting a high of 1,172p, up 45p, before an afternoon bout of profit-taking saw the stock close unchanged at 1,140p. In the wider market, London traders ignored a weak session on Wall Street and continuing tensions with Iran to send the FTSE 100 57 better by the close to 6,324.2. Brokers were buoyed by renewed merger and acquisition talk, along with bright trading statements from Compass Group, up 15.75p to 335.75p, and Tate & Lyle, 29p firmer at 573.5p.

Chip stocks were in focus after two major brokers upgraded their recommendations on ARM Holdings, up 1.5p to 133p. UBS upgraded the shares from "neutral" to "buy", raising its target price to 155p, citing strong demand for 3G handsets. The microchip rivals CSR and Wolfson Microelectronics were also in demand thanks to the positive broker comment, with CSR adding 24p to 664p and Wolfson gaining 8.25p to 301p.

Brokers were divided after an in-line trading update from Electrocomponents, with Collins Stewart urging its clients to buy the stock while Shore Capital advised its clients to get out. Shore believes the electronic components supplier could see a market slowdown over the next couple of years. However, buyers held the upper hand and the shares rallied 4.75p to 288p.

It takes a brave analyst to recommend buying shares in the beleaguered photography retailer Jessops, after the company's third grim warning so far this year on Wednesday, but Panmure Gordon took a chance and upped its stance from "hold" to "buy", albeit with a 20p price target. The broker says the company is valued at just 5 per cent of sales, and that "it is either going bust or is worth substantially more". Meanwhile Seymour Pierce advised clients to get out, reiterating its "sell" advice. The shares nudged 0.25p better to 15.25p.

There could be more upside left in the software group Pixology despite yesterday's 5.5p rise to 23.5p. The company reassured investors that bid talks, now more than four months old are progressing and that it will update investors soon. It also confirmed that it has more than £5m of cash in the bank, more than its market value at yesterday's close.

Cardinal Resources ticked 0.75p worse to close at 18.75p, but market speculation that the company may need to come back to shareholders to raise more capital looks to be well wide of the mark. The company raised $17.5m in December through an issue of PIK notes.

Finally, Entertainment One, Canada's largest distributor of home entertainment, made a solid if unspectacular start to life on the public markets after a placing at 100p through the brokers TD Securities and Collins Stewart. The company raised £85m, and the shares closed at 103.5p.