Market Report: Is activity finally around the corner at the Pru?

Click to follow
The Independent Online

Long-awaited corporate activity at Prudential could be just around the corner, even though the shares only moved 3p firmer to 717p. However, it may not mean a bid for Prudential.

Some traders are speculating that it, rather than Aviva, could tempt Lloyds TSB into selling Scottish Widows, its life assurance arm. Lloyds has claimed that Scottish Widows is core to its strategy but there is little doubt among analysts and investors that the £7bn acquisition in March 2000 has been a drag on the shares. Prudential is thought to be open to offers about a big deal and the recent sale of internet banking arm Egg, while not exactly filling the coffers, does remove one obstacle from corporate action. One trader said: "Something is going to happen here and these are not stocks to be short of at the moment." Aviva climbed 8p to 847p while Lloyds added 4.5p to 607p.

The US investment bank Lehman Brothers upped its target price for gas supplier Centrica to 320p, still some 13 per cent below where the stock is currently trading, but not surprisingly reiterated its "underweight" recommendation. However, the word doing the rounds in the market yesterday was that a bid for Centrica could be on the way almost exactly a year after Russian giant Gazprom hinted that it is interested. The shares nudged 3.5p better to 369.25p.

The word among dealers is that sales traders at Goldman Sachs are pushing the idea that electrical goods retailer DSG International is being lined up for a buy out. The story has done the rounds several times in the past but lots of traders are taking the chat seriously. The favourite to bid is Permira, which has launched a number of failed public to private bids in the last year including HMV Group and Emi Group. DSG closed 5p firmer at 175p.

Talk that private equity group Cinven is mulling an offer for plumbing giant Wolseley was dismissed by most traders but the shares still closed 95p firmer at 1,407p, to top performer in the blue chips. One trader said: "Cinven does not have the resources to fund this kind of deal alone, not by a long stretch. The possibility of a consortium bidding for Wolseley should not be written off but given the amount of small acquisitions the company has made in the last few years, the amount of operational work required is probably enough to put most venture capitalists off."

London traders were in bullish mood on merger and acquisition speculation and comments from US Federal Reserve chairman Ben Bernanke that were taken as a guarantee that US interest rates will fall in the second half of the year. The FTSE 100 climbed above 6,400 for the first time since December 2000 and closed 39.4 better at 6421.2.

The Dutch broker ABN Amro was pushing Group 4 Securicor as a potential bid candidate following speculation that Scandinavian rival Securitas is in offer talks. ABN Amro told clients that Group 4 is "a much more likely takeover candidate and believe renewed focus on the industry will lead to a re-discovery of this fundamentally attractive share." The broker reiterated its "buy" recommendation on the stock and gave the shares a 230p price target, but they closed half a penny lower at 195p.

British Energy was high on the list of movers again, this time as US broker Citigroup cut its price target for the shares to 350p from 450p and maintained its "sell" recommendation. The investment bank cited unhedged exposure to the electricity market for the cut in forecasts, sending the shares 20p worse to 390p, a new 18-month low. Blue-chip stock Drax Group was also lower, off 12p at 662p, on the back of Citigroup's note.

Investors in Aim listed African Platinum were celebrating after the group received a bid worth 55p per share from rival Impala Platinum. Over 23 million shares changed hands as the stock closed 9.5p firmer at 50.25p, breaking the stock out of the 20p-40p trading range it has been stuck in for the last three years. News of the bid also excited mid-cap player Aquarius Platinum, 75p better at 1,585p, one of the star performers in the market so far this year.

Two small-cap oil stocks provided the disaster of the day. Gulfsands Petroleum and Emerald Energy tanked as poor test drilling results from a joint venture in Syria proved inconclusive. Gulfsands, 32p worse at 70p, will press on with further drilling but Emerald, slightly better off after a 38.25p drop to 153p, said it would not participate.

Finally, Haike Chemical Group became the latest Chinese company to list on aim following a placing by broker Hanson Westinghouse at 80p per share, valuing the company at £30.8m. The speciality chemicals group raised $17m of new funds in the placing and closed its first session at 130.5p, giving lucky shareholders a 63.1 per cent premium.