Market Report: InterContinental soars on Hilton Hotels deal

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The Independent Online

Hotels had the London markets buzzing in early morning trading, after Blackstone's knockout $26bn (£13bn) deal for Hilton Hotels on Tuesday. The surprise buyout drove up shares across the sector, with InterContinental Hotels Group rocketing up the blue-chip leaderboard to close 49p higher at 1,307p.

There was talk in the market that the Blackstone deal could resurrect speculation over InterContinental's future. Earlier this year, it was reportedly a private equity target. One analyst said the hotel sector had seen a number of mergers and acquisitions and the interest would continue, whether through internal consolidation or private equity buyouts. "There has been a land grab, and a brand grab in the sector," he added. Millennium & Copthorne also closed up, gaining 26p to 678p, and Whitbread rose 52p to 1,805p.

The hotel bounce helped boost the FTSE 100, which finished 33.3 points higher at 6,673.1. Airlines made their way back after dips earlier this week, with British Airways top of the pile among the prestige stocks and easyJet also up in the second tier.

Panmure Gordon released a note urging Aviva to sell its non-life insurance business. It was a call backed by the market, as shares in the UK insurer climbed 13p to 768p. The broker said: "The recent floods, non-life rates in freefall and investors ascribing very little-to-no value to its non-life operation, a sale is an obvious route to a re-rating of the shares."

Shares were also up in Land Securities over talk that the group was set to launch a share buy-back. One market-maker said: "This would be a first for Land Securities and would provide a huge vote of confidence for the share price." It finished near the summit of the top-tier risers, up 36p at 1,768p.

There was further chat of a takeover bid in the offing at Scottish & Newcastle, with traders backing Carlsberg to launch a bid worth 700p per share. While there was initial interest, when the dust settled the stock held steady at 633p.

Another reheated rumour, this time in the mid tier, came in the form of a potential 900p-per share takeover bid for Quintain Estates by an unidentified suitor. The shares gained 25.5p to 747p.

The appearance of the activist investor ValueAct on its shareholder register boosted "shake-up or break-up" speculation at Rentokil Initial, which rose 5.25p to 172.5p. The vermin extermination group was backed by UBS, which raised its target price from 185p to 175p, saying the outlook was improving for the firm.

Investors backed Morgan Crucible, despite the group revealing its first-half profits would be hit by the strength of sterling. In a first-half trading update, it said revenues would still be up 8 per cent over last year, with the brokers Cazenove and Bridgewell backing the stock. The market also reacted well to news the business was looking for potential acquisitions. The shares rose 4.75p to 297.5p.

It has been a topsy-turvy few weeks for Micro Focus International, which makes business software. Last week, it sunk after a fairly positive trading update, before topping the risers the following day following broker support. Yesterday, it was the biggest loser in the medium tier after it raised £36.4m in a secondary placement. The placing of 14 million shares at 260p was revealed in a statement from UBS. The stock closed down 7.4 per cent at 262.25p

Confusion reigned at Worthington Nicholls, which dropped on the back of a statement that one market-maker described as "quite extraordinary". Traders were unsure how to react to news that the group had materially understated its business pipeline in last week's results. It says the pipeline stands at £125.3m, not the previously stated £61.3m. Worthington fell slightly in afternoon trading but rallied 2.24p to 115.25p at the close.

The software company DDD Group spiked after securing a licensing contract from one of the world's largest mobile phone manufacturers. Samsung is set to launch a 3D mobile in South Korea with DDD's software and content. The market backed the firm, which will get a royalty fee for every handset sold, with the shares doubling to 12.75p. One trader, however, expressed fears the stock had come too far too soon. DDD was founded in Perth in 1993 and struggled to maintain its value after listing on AIM at 79.5p in 2002.

Pan African Resources fared well on its readmission to AIM, rising 45 per cent to 8.75p. The firm is set to buy 74 per cent of Barberton Mines as it looks to change from a junior gold exporter to a mid-tier gold producer.

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