Market Report: Restructuring may be the best medicine for Glaxo

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The Independent Online

Investors aren't just hoping for good results from GlaxoSmithKline this morning. Some traders are betting that the company will announce some radical corporate restructuring along with bullish third quarter numbers.

The talk yesterday was that the pharmaceuticals giant will auction off its consumer healthcare unit, which is no longer seen as a core operation since the company was outbid by Johnson & Johnson for Pfizer's healthcare unit. An auction or demerger of Glaxo's healthcare brands, which include Lucozade, Aquafresh and Ribena, would allow the company to focus on its pharmaceutical pipeline and free up cash for acquisitions.

One trader said: "With a handful of rumours doing the rounds in the market over a possible merger with Swiss rival Novartis, there is already a lot of good news in the share price. But if Glaxo does want to get rid of its healthcare arm the shares could get a major re-rating."

Glaxo shares added 22p to 1,511p, while rival AstraZeneca closed 42p better at 3,529p, a new high for the year and just short of an all-time high.

Property stocks were also in focus as a couple of broker upgrades boosted the sector. Oriel Securities urged its clients to buy British Land, 18p better 1,452p, as the broker said that City rents are seeing greater momentum than in the West End. Meanwhile, Hammerson's Paris roadshow drew more positive comment, this time from Citigroup, which upped its target for the stock to 1,470p. Hammerson closed up 15p at 1,330p.

Sugar producer Tate & Lyle broke through 800p for the first time, following news that the company is to dispose of its European starch operations. The shares closed 29p better at 801p as German broker Deutsche Bank upped its stance on the shares from "neutral" to "buy" and increased its target price to 900p.

The City certainly seems to have avoided the usual October sell-off, as the blue-chip index was driven to new highs by continued merger and acquisition speculation and stronger commodity prices. The FTSE100 closed 32.1 better at 6214.6.

Bid speculation at Big Yellow Group, the self storage warehouse operator, has done the rounds a couple of times in recent weeks and the shares surged again yesterday, closing 26p better at 557p. The stock has been on a spectacular run since March 2003 when the shares hit a low of 67p. Traders pointed out that yesterday's volume of 1.4 million shares is double the average daily volume, but that the shares are notoriously thinly-traded for a FTSE250 stock.

The technology sector has been one to avoid in the last few weeks as a wave of bad news has reminded investors of the worst of the tech boom fallout. Yesterday, the private equity group ValueAct Capital took a 4.4 per cent stake in Misys, 4.75p firmer at 205p. No coincidence perhaps, as new chief executive Mike Lawrie was once employed by ValueAct. Swiss broker UBS also leant its support to Misys, maintaining its "buy" recommendation on the back of the ValueAct stake acquisition.

Confirmation that bid talks involving Northgate Information Solutions have failed sent the shares 11p worse to 82.5p. However, the company still has its fans and broker Bridgewell Securities reiterated its "overweight" stance on the shares.

According to market makers, investors are selling Weather Lottery because of trouble at rival lottery group Chariot, despite the former's long track record and established business. Weather Lottery, which runs fund raising lotteries for sports clubs, schools and charities based on global temperature readings, has been in business for 9 years and is profitable. Shares in Weather Lottery fell 1.25p to 5.5p yesterday, well below the 13 September listing price of 8p. Meanwhile, hopes of a bid for Chariot look to be fading as the shares shed 0.35p to close at 0.8p.

IPSA Group, a dual-listed South African power plant developer, raised £2.2m through a placing in Johannesburg at 6.05 Rand, the equivalent of 42p. The London-listed shares climbed 2.5p to close at 40.5p, but sharp-eyed traders may spot that the shares, which are fully transferable, closed at the equivalent of 47p in South Africa. If the shares hold steady in Johannesburg tomorrow there should be more upside left in the London listing.

Alexander Mining, a copper and silver miner with assets in Argentina, announced that it has begun copper production after only 14 months of drilling, well ahead of the usual time frame. The shares rallied a penny to 21p.

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