Market Report: ITV rises on talk of new Dyke private equity bid

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The Independent Online

Just when it looked as if things could not get any worse for management at ITV, the word in the market is that the company could face another private equity buyout bid, especially if, as expected, the chief executive Charles Allen doesn't stay in the top job for much longer.

Viewing figures for the group over the past two months have been little short of disastrous, and Bernstein Research believes that unless there is a rapid improvement, investor pressure will open the doors to another private equity bid. Talk that Mr Allen will resign has been widespread and although there is talk that a successor has been chosen, most investors believe he or she will stand little chance of beating off a well-priced bid.

ITV rejected two offers from a consortium of buyout houses, thought to include Apax Partners and The Blackstone Group in March, which valued the shares at 130p each. Greg Dyke, a former director general of the BBC, fronted the Apax team, and if Mr Allen goes few traders would bet against Mr Dyke launching a third offer. Another name in the frame is Cinven, another private equity group with European cable assets. Traders certainly looked like they believed the story yesterday, as ITV shares gained 4.5p to 101.5p.

The property sector got a lift from Hammerson, as the company paid £199m for LxB Holdings from Bank of Scotland Corporate, West Coast Capital and BG Holdings, which owns a portfolio of retail warehouses valued at £425m. Analysts and investors applauded the acquisition, sending shares in Hammerson 34p better to 1,274p. Property rivals Land Securities firmed by 33p to 1,975p while Liberty International added 18p to 1,153p.

London shares reversed two sessions of losses to add 51.3, as the FTSE 100 closed at 5,932.1 on good corporate earnings and a much stronger opening on Wall Street as Time Warner reported better than expected results.

Any traders shorting Cadbury Schweppes before results got their fingers badly singed as the group reported a strong second quarter and limited damage from the salmonella scare. Merrill Lynch reiterated its "buy" recommendation with a 575p price target, as the stock added 16p.5 to 537.5p.

Investors in AB Foods have been swamped with positive broker comments as the stock has outperformed the wider market in spectacular fashion, adding more than 20 per cent since mid-June. UBS upgraded its forecasts for the sugar and retail conglomerate yesterday, upping its price target for the group to 990p and sending the shares another 12.5p better to 847p.

Investors in mid-cap oil exploration and production stocks had a good day, as Venture Production's £152m acquisition of North Sea gas producer CH4 sparked a round of buying. Venture believes the purchase of CH4 will add 20 per cent to its proven and probable reserves. Shares in Venture climbed 59.5p to 837p, while its peers Petrofac and Premier Oil added 12.75p to 285p and 42.5p to 1020p respectively. Private equity group 3i, which owned a large stake in CH4, climbed 19.5p to 936.5p on another good exit for the group.

Elsewhere in the mid caps, Cookson and Tomkins both reported results within the expected range but suffered as many investors had been expecting the companies to beat forecasts. Merrill Lynch was particularly downbeat on Tomkins, saying in a note to clients that yesterday's results "contain no major positives." Shares in Cookson topped the FTSE 250 fallers, shedding 38.25p to 509p, while Tomkins lost 17.5p to 266.75p.

Investors continued to desert Watermark, the aviation support services group. The company confirmed on 20 July that funding discussions with a private equity group had failed and that stock write-downs and obsolete debt would reduce profits in the current year by about 45 per cent. The shares, which had been trading at 110p before the announcement, fell 9p to 49.5p, a four-year low.

Monterrico Metals, the Peru-based copper mining group, took another hit as Juan Valdivia was named as Peru's mining minister. There are fears he may impose a mining windfall profit tax on mining companies. Shares in Monterrico fell 13.5p to close at 182.5p.

Although there was little movement in the share price, investors are enthusiastic about an announcement from Accys Technologies, which said it has signed an exclusive agreement with leading German timber trader Roggemann Group to be the sole providers of Accoya wood in Germany. The shares closed €0.01 better at €1.26.

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