Market Report: Reckitt Benckiser tipped to deliver the goods

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The Independent Online

There are a lot of people who will argue, very convincingly, that large-scale mergers and acquisitions rarely deliver the value they promise. Reckitt Benckiser, the Anglo-Dutch household goods group, is one merger that has succeeded spectacularly, trebling the value of the company in the past seven years.

If the analysts at Panmure Gordon and UBS are right, there is more good news in the pipeline for the shares, and yesterday both urged their clients to buy the stock ahead of third-quarter numbers, due on Tuesday. UBS was particularly bullish, giving the shares a price target of 2,500p. The Swiss broker expects the group to reveal "solid momentum" in Western Europe on top of better performance in emerging markets, and it would not be surprised if Reckitt upped its own forecasts for the full year. The shares rose 53p to 2,213p, a couple of pennies off the all-time high.

GlaxoSmithKline is also due to report third-quarter numbers next week, and the word in the market is that it will beat expectations. The shares have been outperformed by AstraZeneca in recent years, despite a widely held view in the pharmaceutical industry that the worst of Glaxo's problems are in the past. Glaxo shares closed 16p better at 1,492p, while AstraZeneca added another 87p to 3,509p, a four and a half-year high as the European rival Novartis announced strong results.

It was a bad session for anyone banking on more blue-chip takeovers, as most of the main fallers were stocks that have been talked up on bid speculation. Kelda, down 9.5p to 882.5p, and Severn Trent, 21p worse at 1,441p, suffered as traders said more water deals look unlikely in the short term. Morrison Supermarkets, thought by some to be a target for Kohlberg Kravis Roberts, shed 4p to 253.5p and Corus Group fell 8.5p to 478.5p as expectations grew that the board is set to recommend Tata Steel's 455p-per-share offer.

Blue-chip shares had a mixed session, as the FTSE 100 hit a high of 6,183.5, only to then give it all back to hit a low of 6,113.11 before closing at 6,156, a gain of 5.6. Strength in mining and pharmaceutical issues was offset by some selling in banks and oils.

Whispers of a management buyout at Northern Foods have been doing the rounds for a while now, but the market seems to be paying them little heed. The disposal of the group's chilled pastry and cakes businesses is still occupying management. The shares ticked 1.5p firmer to 89.5p yesterday.

Enodis, the manufacturer of ovens and refrigerators for the restaurant industry, turned down two takeover bids earlier this year, but it looks like investors are anticipating another offer. The shares have been hovering at just above 180p for a couple of weeks but a buying surge yesterday afternoon sent them up to 189.25p, a rise of 6.5p, before some investors cashed in, leaving them 4.5p better by the close at 187.25p. Two US rivals, Manitowoc and Middleby, tried to buy the company in August and traders are speculating that either could come back with a better bid this time around.

In the small caps, the interactive DVD developer Bright Thing raised £1.1m of new funds via a placing at 11p. The chief executive Dominic Wheatley will increase his stake in the company by just under a million shares, and traders took it as a sign that the company is in good health. The shares closed 0.75p firmer at 11.25p.

The biotechnology group Proteome Sciences continues to attract buying support, closing 6p better at 58p. The word in the market is that a major deal to commercialise its technology is in the pipeline. The company has confirmed that it is in negotiations, and a deal is expected to transform its financial status. The share price is also being propped up by a widely known short position, thought to be in the region of 3 million shares, which will be hard to close if an announcement is made.

Elsewhere in the biotechnology sector, Bodisen Biotech surged 63p to 560.5p on the back of a "buy" recommendation from the broker Charles Stanley after Wednesday's trading update. However, much of yesterday's gains are down to the tiny free float and lack of liquidity in the shares - fewer than 5,000 changed hands.

Following a disastrous session on Wednesday, when the shares of Bango fell more than 20 per cent after it warned it would not break even by the end of the year, they closed 2.5p worse at 85p. The broker Teather & Greenwood slashed its forecasts and downgraded the stock to "reduce" from "buy".

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