Market Report: Royal & Sun shines on speculation of Buffett bid

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The Independent Online

Royal & SunAlliance has been mentioned as a possible private-equity target on numerous occasions, and traders piled into the stock yesterday on rumours of an imminent 165p bid. RSA shares rallied 6.25p to close at 138.25p, with 58 million shares changing hands, although the company said it had not received any takeover approaches.

Traders have focused on the usual buyout suspects, but one new name in the frame is Warren Buffett, the US investor and world's second-richest man. Mr Buffett, who has made a fortune in insurance over the years, has often boasted thatinsurance is an industry he understands. His investment vehicle, Berkshire Hathaway, with a market capitalisation of $137bn (£78bn), could afford to buy RSA with the change in its back pocket. As could Mr Buffett, whose personal wealth is estimated at more than$40bn.

Early chat was dominated by Barclays, a stock which has been talked of as both predator and prey in recent sessions, after a Madrid-based website claimed the UK bank was poised to launch a bid for Bankinter, a Spanish rival. Barclays was said to have offered €65 a share for an 11 per cent stake in Bankinter, owned by the Canary Islands entrepreneur Ram Bhavnani, but analysts and traders doubted a deal would be struck in the near future.

The respected financial boutique Fox-Pitt Kelton said: "There is some strategic sense in Barlcays trying to buy Bankinter. Not only would Barclays be able to double its market share in Spain, and improve the operating profitability of its franchise there, it would also be purchasing a unique IT platform that could theoretically be rolled out to other franchises." Such upbeat talk helped Barclays climb 5.5p to 671p.

After a lacklustre morning, during which the London market struggled to move up from single-digit gains, a strong opening on Wall Street helped the FTSE 100 edge closer to the 6,000 mark. The blue-chip gauge closed up 28.1 at 5,993.2.

Today sees the first "triple-witching" session of the year, with index futures and options, as well as stock options, expiring. If that causes the usual volatility, most traders expect to see the 6,000 mark breached for the first time since March 2001. Among the leading stocks pushing the index higher were Vodafone, up 3p to 130p on news of private-equity interest in its Japanese division, and BT Group, 8.75p better at 233.5p.

Winners heavily outgunned losers in the FTSE 100, and even losses for the oil giants BP, 6p weaker at 659p, and Shell, 3p lower at 1850p, could not prevent the market ending in positive territory.

The best-performing sector of the day was house building, buoyed by recent confident outlook statements, an upbeat housing market survey and hopes the sector will consolidate. Persimmon led the list of gainers, adding 38p to 1,393p. The bid favourite Bovis Homes climbed 37.5p to 913.5p, whileRedrow was 36.75p better at 584p. Crest Nicholson was the biggest riser in the sector, adding 34p to 525p, as it announced it had won preferred developer status in a £250m project led by South East England Development Agency.

Collins Stewart Tullett was the subject of speculation, as traders talked of a possible 770p bid for the broker from the US investment bank Bear Stearns. A bid pitched at that level would value Collins Stewart at about £1.6bn, although brokers said much would depend on how Terry Smith, the combative chief executive of Collins Stewart, views an approach. Shares in the broker rallied 19.5p to719.5p.

Premier Oil led second-line oil stocks after the broker Teather & Geenwood upped its stance on the stock from "sell" to "buy", noting that Premier's shares have underperformed the market by 9 per cent since its last change of opinion. Its shares bounced 45p to 905p.

Among small caps, the drug discovery group Henderson Morley added 0.43p, or 53.8 per cent, to 1.23p, after it confirmed it had reached advanced-stage talks with a potential partner to license applications of its Ionic Contra Viral Therapy Technology.

The Asia-focused investment bank Crosby Capital advanced 1.75p to 97.5p after brokers digested strong numbers from the group. Profits for last year hit $112m on income of $151m. Crosby stock has returned more than 400 per cent to shareholders in the past year, and the broker Killik & Co saidit expected a substantial rerating of its shares as a result of these numbers.

No day is complete without the obligatory AIM debuts. Legacy Distribution, an Arizona-based distributor of tobacco products, placed at 10p, closed at 13.75p, while Puma Brandenburg, a German residential property firm formed by Shore Capital, raised £185m in a placing at 100p. It moved on to a 9 per cent premium to close at 109p.