Market Report: Nappy days for BBA investors on break-up talk

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The Independent Online

It has long been argued that BBA is ripe for a break-up bid and if you believe yesterday's stock market rumours someone is finally going to do something about it. Shares in the aviation services-to-nappy maker roared 10 per cent, or 30.5p, higher to 323p, on talk that a private equity house is poised to pounce on the company.

It has long been argued that BBA is ripe for a break-up bid and if you believe yesterday's stock market rumours someone is finally going to do something about it. Shares in the aviation services-to-nappy maker roared 10 per cent, or 30.5p, higher to 323p, on talk that a private equity house is poised to pounce on the company.

A break-up bid certainly makes a lot of sense. BBA's two main businesses are in totally different spheres with no overlap between the two. "There is no reason in the world why BBA's two businesses should continue to operate under the same roof," said one analyst who follows the company. He believes a private equity house would have little trouble raising the capital to buy BBA even after its impressive share price performance over the past six months.

BBA stock has soared by 30 per cent since the middle of August and now stands at a four-year high. Alternatively, the company could itself decide to hive off one of its businesses. However, given that BBA has been in its present form for some years analysts are sceptical that its present management team would voluntarily initiate reforms.

In the FTSE 100, Amvescap was again flavour of the day, gaining 19.25p to 348p, as a series of bullish stories about the fund manager circled dealing rooms. Last week Société Générale was rumoured to be considering a bid for the group and yesterday market professionals again reported talk of a possible move on the company by a predator. Analysts believe the French bank is certainly a viable bidder as it is known to be keen to expand its fund management business in the US.

However, talk of a bid was not the only story to surround Amvescap yesterday. Some suggested the company is considering a demerger of its UK operations. This would leave Invesco Perpetual as a stand-alone entity divorced from Amvescap's scandal-hit American businesses. The group is due to post full-year results today and bulls of Amvescap reckon its management could well hint at such a course of action.

An upgrade from Citigroup Smith Barney also buoyed the fund manager. The US broker raised its recommendation on Amvescap to "buy" from "hold" and tipped its shares to enjoy a re-rating over the coming months.

The wider blue-chip index also had a good day, rising 19.5 points to 4,852.3. Investors were buoyed by a drop in the price of oil. The falling crude value is particularly good news for airlines as it is a major cost for them. British Airways rose 5.75p to 265.75p, easyJet added 4.75p to 220p and Ryanair improved €0.44 to €6.31.

Standard Chartered rose 28p to 975p as HSBC, Barclays and Citigroup were said to have joined the list of those interested in buying the 13 per cent stake in the emerging market bank owned by the Khoo family. The shareholding is reported to have been put up for sale after the death of the family's patriarch, Tan Sri Khoo Teck Puat.

Brit Insurance dropped 2p to 80.25p as Panmure Gordon urged investors to abandon the stock. Downgrading its stance to "sell" from "hold", the broker warned that Brit's earnings are at risk going forward. Regal Petroleum added 13.5p to 406p after a bullish update from the group's operation in Romania, Greece and Egypt. Brewin Dolphin, steady at 134p, saw Ian Speke, an executive director at the stockbroker, sell 80,000 shares at 133p.

The bid for Woolworths renewed interest in the retail sector where traders were busy hunting for the next takeover target. They piled into Matalan, up 4.5p to 231.75p, and JJB Sports, up 6p to 214.75p, taking the view that the duo will not make it to the end of the year as independently listed entities.

Charter improved 7.5p to 251.5p as ABN Amro argued that the market has overlooked the potential of the engineer's Howden division. The Dutch broker believes the disposal of the unit is a real possibility and could raise up to £200m for the company. Such a move would do away with Charter's conglomerate structure, while the cash raised could be used to reduce its sizeable debt burden, noted ABN. The most exciting part of Howden is its presence in China, which has the potential to deliver substantial growth.

Silentpoint jumped 2p to 14.25p after brokers drew attention to the fact that the group has a large stake in Silvermines Media, the AIM-listed cash shell. Silvermines shares were suspended last week before a proposed acquisition by the company. Word has it an exciting deal is imminent and could be announced before the end of the week.

Director share-buying pushed Eurodis Electron 2.25p higher to 0.38p.

Market movers

↑ GR Holdings 80p (up 46p, 135.2 per cent). Sells two businesses for £8.9m in cash.

↑ Ascribe 30.5p (up 7p, 29.8 per cent). Assures the market that trading is in line with expectations.

↑ Air Music & Media 9p (up 1.5p, 20.0 per cent). Boasts of having experienced buoyant trading over Christmas.

↑ Ramco Energy 35.5p (up 5.5p, 18.3 per cent). Gets oil and gas exploration licence off the coast of Ireland.

↑ Hill Station 8.87p (up 1.37p, 18.3 per cent). Announces that its full-year results will beat expectations.

↑ Whitehead Mann 91p (up 14p, 18.2 per cent). Sir Colin Southgate, chairman of the group, discloses the purchase of 50,000 shares at 76p.

↑ Jarvis 32.65p (up 4.90p, 17.7 per cent). Unveils £110m refinancing of its outstanding PFI projects.

↑ Dawmed Systems 15.5p (up 2p, 14.8 per cent). Wins two contracts worth more than £1m.

↑ Medical Solutions 9.38p (up 1.13p, 13.5 per cent). Aberforth Partners takes a 15 per cent stake in the company.

↑ Close Brothers 801p (up 49.5p, 6.5 per cent). Rumours that the group may sell off its Winterfloods division resurface.

↑ Marconi 630p (up 35p, 5.9 per cent). Announces partnership with Huawei Technologies in China.

↓ Baltimore 1,847.75p (down 392.25p, 17.5 per cent). Earthport abandons plans to table a bid for the company.

↓ Renold 59.5p (down 10.5p, 15.0 per cent). Brokers slash their forecasts after a full-year profits warning from the group.

↓ TTP Communications 50p (down 6p, 10.7 per cent). Signs 3G pact with ARM Holdings but also unveils a disappointing trading statement.

↓ Bellway 850p (down 14p, 1.6 per cent). UBS downgrades to "neutral" from "buy".

↓ Crest Nicholson 367p (down 4p, 1.1 per cent). UBS downgrades to "neutral" from "buy".

↓ BOC 982p (down 8p, 0.8 per cent). Nervousness ahead of first quarter results from the industrial gases group.