Market Report: Market sweetens to Tate & Lyle bid rumours

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Among the more weird and wonderful stories doing the rounds in the London markets is chat that the sugar producer Tate & Lyle, 3.5p firmer at 720.5p, could be in line for a 1,000p-per-share bid from a private equity group.

Last year, most of the blue chips had some sort of bid rumour, but Tate managed to have an excellent year on the markets without any sort of speculation, as Splenda continued to perform well and the high-fructose corn syrup market remained robust. However, the word among some traders is that a foreign food producer, most widely thought to be the Swiss giant Nestlé or the US group Kraft, is running the rule over the company. One trader said: "It seems like a long shot, but there are certainly still plenty of bulls around who would not be surprised if Tate had attracted the interest of an industry rival.

More speculation, this time that a bout of corporate activity is around the corner at the publishing group Pearson intensified, but, rather than a sale of the entire group, traders are now speculating it may be the Financial Times on the chopping block. Even though the chief executive, Marjorie Scardino, once famously said the pink paper would only be sold "over my dead body", the word in the market is she may be tempted into a sale. Shares in Pearson climbed 11.5p to 836p.

InterContinental Hotels climbed another 35p to 1255p, despite news that Starwood Capital, its most widely touted suitor, is part of a consortium bidding $37.5bn (£19bn) for a US property group. If Starwood is going to find the cash to bid for InterContinental, worth $4.8bn, it will need to dig deep.

There was a spot of confusion among investors who piled into Enterprise Inns following news that its namesake, Enterprise, had rejected a takeover offer. Shares in Enterprise Inns surged to an intra-day high of 665p, 34p better, before a bout of afternoon profit-taking sent them back to 658p, 27p better. The German broker Deutsche Bank reiterated the company as its top pick in the sector.

London shares closed in positive territory, with the FTSE 100 ending 5.8 firmer at 6210.3 as traders looked for bargains following three poor sessions, with good gains in mining and banking issues. Northern Rock, up 11p to 1,155p, led the banking sector higher ahead of its full-year results, due on Wednesday, although Alliance & Leicester fell another 4p to 1,100p on the back of Merrill Lynch's recent "sell" advice.

The insurance sector enjoyed a strong end to 2006, mainly thanks to a relatively mild US hurricane season, rising premiums and cost-cutting. However, ABN Amro, the Dutch investment bank, believes that most of the upside is already priced in, and cut to "add" from "buy" Hiscox, 5p worse at 271p, and Amlin, 0.25p firmer at 329.5p.

Aquarius Platinum has left the rest of the mining sector in its wake recently, ignoring the sell-off in the blue chips and moving on to yet another all-time high. Bullish recent broker notes, including one from Citigroup that gave the shares a 1,400p price target, plus platinum's recent immunity to volatility in the metal markets, sent the shares 44p better to 1,263p.

A review of the telecommunications sector by the heavyweight broker Goldman Sachs resulted in more support for Colt Telecom, 8.75p better at 170.75p. The move follows a decent start to the year for Colt, one of the worst performers in the mid caps in 2006 when it lost more than 20 per cent against a FTSE 250 that rose more than 25 per cent. Goldman upped Colt to "neutral" from "sell".

In the small caps, a strong set of results from Bede appeared to pass underneath investors' radar screens, perhaps not surprisingly as the shares have tanked over the past few years and stand 92 per cent below the 2001 initial public offering price. However, the chip technology group looks to have turned a corner with falling losses, a strong order book and a 236 per cent jump in like-for-like revenues. The shares ticked up 0.75p to 12p.

Despite encouraging recent news flow, the security contractor ArmorGroup International warned investors that full-year results will be marginally below market forecasts. The group blamed poor performance from its Middle East training operations, although an encouraging outlook statement for 2007 offset losses. The shares closed 8.25p worse at 67.5p.

There isn't much competition in the public markets for Aukett Fitzroy Robinson as it is only one of two architecture groups listed in London. Traders are looking out for interim results due next week and if the share price is anything to go by the company should report a strong set of numbers. The shares have soared more than 315 per cent since the start of September, and added another 1.88p to close at 17p yesterday.

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