It has been a little while since the last bout of sector consolidation chat in the housebuilding sector, but if traders are to be believed there is more takeover mileage left in the industry.
In what was generally a weak day for London equities, renewed talk of bids for Crest Nicholson and Bellway sent housebuilders' shares significantly higher against a falling market. With the offer for the retirement home builder McCarthy & Stone all but a done deal, investors are looking for the next consolidation target. Bellway added 14p to close at 1,267p, 12p short of a new high for the year, while Crest added 5.5p to 546.5p. For most sector analysts, it is more a question of when the next bid will come rather than if.
Wolseley, the plumbing and building supplier, has been out of favour in recent weeks with investors fretting about its exposure to the US construction industry. The shares have fallen from a high of 1,462p in March to open at 1,148p yesterday. However, the stock remains a firm favourite with most analysts, and Deutsche Bank upped its target price to 1,570p, sending the shares up 21p to 1,169p, having traded at 1,209p earlier in the session.
Legal & General was another of few bright spots, as the brokers UBS and Citigroup reiterated their "buy" recommendation for the life insurance group after a presentation to institutional investors on annuities. Citigroup has a target of 148p for the shares, up 2.25p to 136.5p by the close, while UBS is more bullish, targeting 160p.
An early rally for London shares saw the FTSE 100 peak at 5943.7, a rise of 51.5, before profit-taking and a poor opening on Wall Street saw all of the day's gains disappear, sending the blue-chip index 15 lower by the close to 5877.2.
The defence contractor Qinetiq, up 5.5p to 182p, was buoyed by Wednesday's bumper results from BAE Systems, and the shares have now broken through resistance at 175p and could be set for a decent run. The stock has been little short of a disaster since making a controversial debut in February, amid howls of protest over the returns made by the private equity backer, The Carlyle Group. BAE eased 6.75p to 376p, despite the broker Dresdner Kleinwort upping its price target for the shares from 450p to 600p, as the group confirmed the Airbus A380 faces further delays before going into full service.
Second-line water stocks were in demand after confirmation of a £2bn bid for AWG. Pennon Group, formerly South West Water and itself a frequent target for bid rumours, added 27p to 4,978p, while Northumbrian Water firmed 9.25p to 262.25p, both all-time highs. AWG soared to new highs, adding 150p to 1,512p as the market digested news of an approach that was thought to value the shares at 1,600p.
Confirmation that Premier Foods has dropped out of the race to buy United Biscuits may have knocked Premier's shares back, but for many traders it is anything but bad news. One said: "Getting caught up in a bidding war with private equity groups is not a great idea, and with Premier having recently acquired Campbell's UK and Irish businesses this is not the time to be eyeing up another major acquisition." Premier Foods shed 14.25p to close at 264.75p.
In the small companies, there were plenty of sellers around Central African Mining. The company has denied a recent claim in a South African newspaper about dwindling cobalt supplies, but the shares fell through the crucial 50p support level yesterday, sparking a wave of selling with the chart looking increasingly bearish. The stock closed 4.5p worse at 43.5p as 8 million shares were traded.
Plusnet, the business and home broadband supplier, jumped 15p to 120p thanks to some short covering and vague bid speculation. The shares have had a torrid time since peaking at 409.5p in March, mainly thanks to competitive threats posed by the likes of Carphone Warehouse and BSkyB entering the broadband market. The word is that an approach worth 150p per share is on the cards.
Disaster of the day in the small caps was Frontera Resources, which tanked 51.5p to close at 37.5p, a fall of more than 57 per cent. The mining group extended first-half losses from $2.8m (£1.5m) in 2005 to $5m this year. But worse, the company is going to attempt to restructure operations at its main asset in the former Soviet state of Georgia. With few other assets, investors spent yesterday running for the hills. Market makers reported one-way trade, with 1.3 million shares changing hands.
There was a good start on AIM for the Seattle-based Prometheus Energy, a liquefied natural gas group, after an introduction by the broker Jeffries International at 82p. The shares closed at 93p, giving investors a healthy 13.4 per cent premium, valuing the company at £55m.Reuse content