Market Report: Retail Decisions slips on talk of takeover hitch

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The Independent Online

City punters betting on a takeover of Retail Decisions had a stressful time yesterday. Shares in the fuel-card operator plunged 20 per cent in early trade to 134p. The rest of the session saw the stock slowly claw back these losses to end down 4 per cent at 160p.

Why the dramatic price movement? One theory suggested takeover talks at Retail Decisions are foundering and could be about to collapse. The fact that the group is due to post results today only added to the nervousness of some investors. However, this theory was largely dismissed by analysts who follow the company closely. They point out that three US companies are known to be interested in buying the group and that it is unlikely that all three have suddenly lost interest in bidding.

A more Machiavellian explanation for yesterday's volatility suggested that an investor who was keen to add to his stake caused the early panic in the stock. By selling a small parcel of shares at excessively low prices, he caused a sharp drop at Retail Decisions. This may have spooked big shareholders into thinking bid talks had hit the rocks and caused them to dump their shares into the market for him to scoop up.

Retail Decisions was put into play in May when it received a 175p-a-share offer from FleetCor, which is owned by the private equity firms Bain Capital and Summit Partners. This was rejected by the company's board. Wright Express, which operates the Universal Fleet card across the Atlantic, and Comdata, part of the Ceridian Corporation, are the others known to be running the slide rule over the firm.

The shenanigans at Retail Decisions unsettle two other long-running takeover situations. Photo-Me, which is in talks about a buyout with its two biggest shareholders - the hedge funds Och-Ziff and Cycladic Capital - dropped 0.5p to 108.25p. Those betting on a bid for the photo booth operator will certainly be hoping for some soothing words from management about the state of takeover talks at today's annual meeting. Meanwhile, Morgan Crucible, which is tipped to soon be on the receiving end of a bid from DLJ, the private equity arm of Credit Suisse, fell 3p to 295.75p.

The wider market was also in retreat. The FTSE 100 dropped 58.4 points to 5,831.8 as the mining sector suffered a heavy sell-off. Lonmin fell 77p to 2,591, Antofagasta lost 9.75p to 438.25p, Xstrata gave up 54p to 2,151 and BHP Billiton slid 17p to 910p. One wild rumour to circle dealing rooms late in the session talked of a possible bid for the US copper miner Phelps Dodge from Rio Tinto, down 65p to 2,409p.

Kazakhmys fell 56p to 1,210p after news that its chief executive, Y K Cha, plans to step down sparked fears that a big chunk of his stake in the company could soon find itself on the market. He owns 15.6 per cent of the Kazakhstan copper miner. The lock-up governing his stake expires on 7 October. Kazakhmys also posted better-than-expected interim results. Earnings before interest, tax, depreciation and amortisation soared 124 per cent to more than $1bn (£530m) for the six months to the end of June.

Vodafone fell 2p to 114.25p amid rumours that the mobile phone giant may be about to take a stake in Italian broadband provider Fastweb. GlaxoSmithKline lost 36p to 1,433p after Bear Stearns downgraded its recommendation on the stock to "underperform" from "peer perform". The broker said it will be difficult for GSK to achieve its target of high single-digit sales growth given the increasing competition it faces in key franchises and the absence of new blockbuster launches.

Among the small companies, Golden Prospect added 2p to 57.75p on the back of record interim results. Pre-tax profits rose 52 per cent to £7.7mn while the group upped its dividend from 0.5p to 0.75p. The company is turning itself into an investment bank and will soon change its name to Ambrian Capital. Yesterday's strong results were the result of booming trade at its Ambrian broking division. It is fast carving out a niche for itself as a specialist in the small-cap resources sector.

Coffee Republic fell 0.08p to 2.19p as Bobby Hashemi, the chairman of the coffee shop chain, denied rumours that he plans to take the company he founded private. He also said the persistent speculation about the Coffee Republic's future had undermined the roll-out of its new deli concept. Hopes that Mr Hashemi might launch a buyout pushed its shares up to the 4p level last week, their highest in nearly 4 years.