Market Report: M&B cheers renewed hope of Tchenguiz bid

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The Independent Online

It is nearly eight weeks since R20, the takeover vehicle of Robert Tchenguiz, confirmed it was considering making an offer for the pub and bar group Mitchells & Butlers. Since then, Goldman Sachs, a key partner in the consortium, has dropped out of the running, leading to some sector watchers wondering if Mr Tchenguiz will be able to find a new partner to provide equity to complete the necessary finances.

The rumour early in trade yesterday was that Mr Tchenguiz won't and that the deal will fall apart. However, market-makers blamed traders who are short of the stock for starting the rumours and by the end of the session the shares were the best performers in the FTSE 350, 33.75p better at 516p.

Rather than the bid falling apart, the word by the close of trade was that the bid would come some time this week at 550p a share, a price that has been widely anticipated since the takeover talks began. Deutsche Bank has replaced Goldman on the bid team, and with support from Barclays Private Equity and Apax, traders do not anticipate it being a struggle to find the cash, even when it is £4.6bn including debt. It is thought another backer was found to join the consortium yesterday and provide equity for the £900m package planned for the bid.

In the FTSE 100, an uninspiring set of production updates from the copper miners Antofagasta and Kazakhmys meant a weak day for the commodities sector. Antofagasta finished the session 57p lower at 2,383p, while Kazakhmys dropped 45p to 1,149.5p.

The main dent in the leading index was caused by a sell-off in oil majors, with BP 11p worse at 677p and Shell, due to report first-quarter numbers today, 40p worse at 1,948p. The two make up almost 25 per cent of the main London index, leading to a 72.1 point fall in the FTSE 100 to 6,010.0. Chart-watchers will be worried if the index fails to recover in the next few sessions.

The steel maker Corus was one bright spot, as the broker Cazenove upped its earnings forecasts for the group for 2006 and 2007 by 15.4 per cent and 44 per cent respectively. In a note to clients, it said: "We don't think the valuation multiples fully reflect yet the potential of ongoing operational improvements, upside to the margin of the long products division versus its European peers or the company's candidacy as a takeover target." The shares firmed 0.75p to close at 88.25p.

Volatile online gaming stocks received a setback as reports came in that a US Congress subcommittee has approved a Bill that may toughen US laws against online gambling. The news comes less than a fortnight after the American Gaming Association, the gambling lobbying body, gave its backing to the industry. PartyGaming shed 7p to close at 148p, while its rival 888 Holdings ended the session 14.25p weaker at 230.5p.

In the mid-caps, the Johannesburg-based fund manager and stockbroker Investec surged 124p to 3,220p as the company revealed it would hit forecast 2007 numbers before the end of the current year. The shares have outperformed the equity markets by more than trebling in value over the past three years. Fellow mid-cap fund manager Rathbones also gave the market a positive trading update at its annual meeting yesterday, sending its shares 25p better to 1,190p.

The communications technology group Spirent, which was part of the FTSE 100 at the height of the boom, was among the best performers in the FTSE 250, closing 2.5p firmer at 45.25p. It is still a long way from the 690p the shares traded at in April 2000, but first-quarter revenues were ahead of the company's expectations.

In the small caps, Shed Productions was unloved despite saying full-year numbers would be in line with forecasts. ITV has declined to re-commission a sixth series of Footballers' Wives, despite the success the series has enjoyed in the US. Traders abandoned the stock, sending the shares down 5p to 132.5p.

Shareholders of Lonrho Africa have had a good year so far - the shares have more than trebled since January. The talk is that proposed IPOs of two companies in which Lonrho has substantial stakes, Nare Diamonds and Brinkley Resources, will get a warm welcome. The shares climbed another 2.25p to 37.75p.

Small cap resource bears are keeping a close eye on AIM-listed First Africa Oil, 0.16p weaker at 3.73p. A major investor, Energem Resources, had its shares suspended in Toronto on Tuesday after a 30 per cent fall and failing to file accounts and the resignation of two directors.

Finally, RC Group raised £25m through a placing at 53.5p and announced it has bought stakes in two south-east Asian IT equipment distributors. Two more earnings-enhancing deals are expected, although the shares fell 2.5p to 59.5p.