Market Report: Kingfisher steps back into takeover spotlight

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The Independent Online

Despite dire conditions on the high street and haemorrhaging sales at B&Q, shares in Kingfisher have held up surprisingly well since the start of the year. The main reason for the stock's performance is persistent takeover rumours, which once again surfaced yesterday. This time there may be something in it.

Traders have been speculating about a bid for Kingfisher for some time, with the usual private equity suspects in the frame as well as the US home improvement retailers Home Depot and Lowe's. Kingfisher's enterprise value, about £6bn including debt, would not put either US company off, but private equity firms may balk at spending so much on a company showing few signs of growth.

Kingfisher's French arm, Castorama, is doing better than B&Q and with the summer season coming, when sales are typically given a boost by the warmer weather, some traders think that the time is right for a bid. Kingfisher finished the session 6.5p better at 230.75p, although volume was not spectacular as 26.5 million shares changed hands, a little over the average daily volume.

It must be rather depressing for Sir Ken Morrison that rumours of his retirement or resignation always give shares in Morrison Supermarkets a boost. The rumour did the rounds again yesterday morning, sending the shares 4p better to 191p before a company source denied that he is about to step down, sending the shares back down to close 0.25p weaker at 186.75p on good volume of 22.4 million.

Still, with a holding of 112 million shares in the company his father founded in 1899, at least Sir Ken can console himself with the knowledge that when he does retire, he will get more than just a carriage clock.

Elsewhere in the FTSE 100, InterContinental Hotels was again higher on bid rumours, with the buyout house Permira thought to be mulling an offer. The shares closed 55.5p better at 1,000.5p. After a couple of weak sessions London shares were well bid yesterday on the back of strength in mining issues, with the FTSE 100 closing 26.9 better at 6,036.9. Bullish comments at Rio Tinto's annual meeting in Sydney overnight gave the sector fresh impetus, as copper gained 4 per cent to move above $7,400 (£4,000) per tonne for the first time. Rio gained 120p to 3,190p while Xstrata added 117p to close at 2,147p. Copper producers Antofagasta and Kazakhmys were also well bid after Wednesday's uninspiring production figures, adding 73p to 2,456p and 45p to 1,194.5p respectively.

The top performer in the second-line stocks was life insurance group Resolution, 41p firmer at 703.5p, as the heavyweight broker Morgan Stanley upgraded its stance on the shares to "overweight" with an 823p price target. The company confirmed yesterday that it is in talks to buy Abbey's closed end life funds in a deal that may value the business at over £4bn.

As expected, the Robert Tchenguiz-led consortium bid 550p for Mitchells & Butlers, and the company instantly rejected the bid. Some traders are hoping for another offer at closer to 600p per share, but most were content to take profits, sending the shares 22p lower to close at 494p.

The department store Debenhams made a difficult return to life as a public company after the shares were placed at 195p, right at the bottom of the expected range. Its previous owners, the buyout houses Texas Pacific, CVC and Merrill Lynch Global Private Equity, had hoped to get the shares away at up to 250p but had to settle for much less as new investors were put off by tough conditions on the high street. The shares managed to push ahead, closing 5.25p better at 200.25p as more than 122 million shares changed hands.

The small capYork Pharmaceuticals jumped 6p to 96.5p on the back of a very positive research note from broker Collins Stewart. The company has a market capitalisation of £22m but has more than £5m of cash on the balance sheet and Abasol, its treatment for various skin complaints, could be given approval this summer. The broker has a bullish target of 342p for the shares.

Retail investors gave a boost to Quadrise, 3.5p firmer at 33.25p. The fuel technology company is relatively new to the market after a reverse takeover of Zareba in April. Since then the shares have performed poorly despite a lack of newsflow, but with alternative fuel stocks in vogue, traders have been picking up stock again on rumours that the company is poised to float its Canadian business.

Anyone buying a ticket for Chariot's charity lottery, due to make its first draw on Monday, will be hoping the draw does better than the shares have done this week. The stock, already down from a high of 213.5p, fell 27.5p to 129p as investors continued to take profits.

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