Traders love a good takeover story, and one that refuses to go away is that Prudential, the UK's second largest insurer, will go under the hammer before the end of the year. The talk in the market yesterday is that the US insurance giant AIG is the latest name considering making an offer for the Pru.
For most British consumers, AIG is known for having its name splashed across Manchester United's shirts and little else. Even your average active UK investor would be hard pushed to explain what American International Group does, which begs the question: why have your name on the UK's most high-profile football team but a very low-profile UK business?
Prudential's market capitalisation of £15.6bn is a fraction of AIG's colossal $174bn (£92.3bn) valuation, and traders believe that regulatory issues would be of little consequence. The Prudential share price has performed well against a dull market in the past couple of months, and according to one trader "Prudential is certainly not a stock to be short of". The shares added another 5p to close at 650p.
Another bid story that refuses to die is in the banking sector, with the spotlight again on Lloyds TSB and Barclays. Reports in the French press that Citigroup has a list of four possible European takeover targets, including Barclays, sent the shares 12.5p firmer to close at 689.5p, just short of a three-year high. Meanwhile, traders were also speculating that BBVA, the Spanish banking giant, is considering making a move for Lloyds TSB, 5.5p better at 547.5p. One trader said: "These stories have been around for long enough, one of them is bound to be right eventually."
A couple of bullish notes from the US brokers Merrill Lynch and Citigroup sent shares in the sugar producer Tate & Lyle to the top of the FTSE 100 leader board, 44p better at 767p. Citigroup upped its price target for the shares to 900p, telling clients they have not missed the boat yet and that there is still "considerable upside" left in the stock. Merrill Lynch increased its target price to 815p. The rival sugar producer Associated British Foods also bounced, adding 7.5p to close at 832p.
In the wider market, a record close on Wall Street on Tuesday encouraged London investors and sent the FTSE 100 29.4 better to 5966.5 at the close, although the Dow Jones knock-on effect was not as pronounced as some traders had hoped.
However, mining issues continued to flounder as futures prices softened again, with Rio Tinto 79p worse at 2,401p, BHP Billiton 44p lower at 870p and Xstrata shedding 66p to 2,180p.
Upgrades from Merrill Lynch and Morgan Stanley helped mobile telecommunications giant Vodafone add 5p to close at 127.25p, after an investor and analyst presentation on the company's Italian and Spanish operations on Tuesday. The two countries account for approximately 26 per cent of group operating profits. Morgan Stanley upped its price target to 146p while Merrill believes the shares are worth 153p.
Strong overnight buying in Australia pushed Brambles Industries 11.25p better to 494.75p, amid talk that the company will receive a bid worth 600p per share, either from a private equity group or from the US industrial giant GE. Takeover speculation has increased since Brambles finalised the sale of its Cleanaway subsidiary last week.
Takeover speculation at AMEC, the support services and construction group, has given the stock good support in recent sessions and the shares firmed 6.75p to355p yesterday. The group has disappointed investors several times over the past 18 months, but the persistent rumours have sent the shares 33 per cent better since the start of August.
The real estate investment group Dolphin Capital Investors became the second largest property group listed on AIM after an institutional placing raised £202.7m of new funds. The broker Panmure Gordon led the fund raising, placing 218 million new shares at 93p with new and existing institutional shareholders. The shares closed a penny firmer at 96p, 40 per cent better than the listing price of 68p last December.
Most traders blamed a slow day in the small caps on the trauma of the online gambling sector fallout earlier in the week. News that World Gaming may be in technical default of its debt conditions sent the shares 3.25p worse to 9.25p, but most investors appear to be either out of the stock or resigned to losing their shirts. Its blue-chip rival PartyGaming now looks certain to drop out of the FTSE 100, as another 0.5p drop to 40.25p gives it a market capitalisation of just £1.6bn.Reuse content