Market Report: Rank rises on talk of US private-equity interest

Click to follow
The Independent Online

Considering the bull run that the London market has been on in the past year or so, the performance of Rank has been, well, rank. The stock trades at a 30 per cent discount to its March 2004 price of 340p, a period in which the FTSE 100 has risen by about 36 per cent.

The US private-equity firm Blackstone Group is thought to be preparing a bid to put shareholders out of their misery, and Blackstone has a lot of cash burning a hole in its pocket. Its latest fund is due to close with $13bn (£7bn) of commitments, the biggest war chest ever raised by a buyout house, even if it is likely to be surpassed in the not too distant future by Texas Pacific.

A bid of 285p would value Rank, which includes the Hard Rock Café chain as well as Mecca Bingo, at about £1.7bn. The shares added 12.75p yesterday to close at 238.25p.

But not everyone in the market believes the rumours, with the spread better Worldspreads reporting that traders had increased their short positions in the belief that a lower offer will not tempt the Rank board. Strong demand for mining and oil stocks and rising commodity prices once again underpinned a decent day for the London market, with the FTSE 100 59.7 better by the close at 6,024.3. Shares were also helped by solid opening trade on Wall Street, as GE confirmed it was selling a stake in its Commercial Finance arm to Cerberus Capital, and Lucent's merger with its French rival Alcatel. The Dow closed 35.6 better at 11,144.94.

With the price of oil touching $67 per barrel, BP and Shell were well bid, BP firming 13.5p to 674.5p and Shell 22p better at 1,894p. BP is due to make a statement on first-quarter trading today.

BG Group followed a strong set of 2005 numbers by saying that trading in the first quarter of 2006 was ahead of expectations. The company has been the subject of numerous takeover stories, with Exxon still favourite among traders to launch an offer, valuing the shares at about 900p each. Merrill Lynch reiterated its "buy" stance on the stock as the shares added another 9p to close at 728.5p.

Miners were also in demand as China announced it would buy uranium from Australia. BHP Billiton has the world's largest known uranium reserves, producing 10,000 tonnes per year. Its Olympic Dam site in South Australia is the world's largest uranium mine. Rio Tinto, the world's second-largest uranium producer after BHP, was also in demand. BHP added 67p to close at 1,118.5p and Rio added another 131p to close at 3,053p, the first time the stock has broken through the 3,000p barrier. Randgold, the FTSE 250 gold miner, closed 83p better at 1,130p, a rise of 7.9 per cent.

Its fellow second-line mining stock Vedanta Resources looks certain to break into the FTSE 100 at the next index reshuffle, possibly at the expense of Daily Mail & General Trust. Vedanta firmed another 73p to 1,483p, while DMGT lost 9p to close at 685p. Vedanta's market capitalisation is now more than £1.2bn greater than that of DMGT.

Cable & Wireless is also in danger of being shown the door from the FTSE 100, as its shares lost 2.5p to close at 106.75p. Some traders have not given up hope of the company being bought but with new management and incentives in place it looks less likely in the short term.

Northern Foods may prove the old adage that when it comes to profits warnings, sell on the first, then buy on the third. Market rumours that the company is about to sell its transportation division gave the shares a small boost yesterday, adding 2.5p to 100p. One trader said: "Northern Foods isn't one to bet your pension on but there are good assets there, which management should be able to do something with. Either they do or they are going to be looking for new jobs soon, and it is the sort of company that might tempt a private-equity bid."

In the smaller companies, the stockbroker Hichens Harrison was 13.5p better at 181p as traders bet that next week's results will be ahead of expectations. Market makers said the majority of the trade was in small retail sizes.

The media and entertainment rights intellectual property group Ludorum enjoyed an excellent first day's trading as the shares closed at 119.5p, a 19.5 per cent premium to the 100p placing price. The stock traded as high as 135p earlier in the session as investors, many of whom lost out on a placing that was six times subscribed, piled into the stock.

High among the day's star small-cap performers was YouGov, as the online polling group added 77.5p to close at 400p. Turnover for the six months to 31 January was up more than 190 per cent, with pre-tax profits leaping from £602,000 to £1.4m.

Comments