Market Report: Scent of takeover action in the air at Rank

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The Independent Online

The market was once more betting on Ladbrokes to finally take a chance on Rank Group yesterday. Traders heard talk that the gaming company was preparing to launch a bid imminently for its beleaguered rival, which, the gossips said, also interested William Hill in the past.

Rank strengthened 3.5p on the hope the rumour wouldn't turn out to be a busted flush, but closed flat at 90.5p. Ladbrokes, which rose 11.75p in the morning, closed 1.75p lower at 379.5p.

There was some vague talk of a rival bid for Close Brothers, which spiked 14.5p in the morning. While market sources poured cold water on the speculation of a consortium coming in to challenge the bid by Cenkos Securities, the stock closed up 7p at 932.5p. Some speculated there could have been some mischief making by someone with a position in the stock.

The rumours of stakebuilding and a potential bid for Minerva gathered weight, as the stock roared 18.4 per cent higher to 196p. The property group was also backed by Merrill Lynch, which upgraded its rating to "neutral".

The blue-chip financial stocks were helped up in the morning by a trading update from HSBC. The banking giant ticked up 23.5p to 866p as it expects third-quarter profits to be ahead of last year, despite a $3.4bn (£1.65bn) US loan impairment. The Bank of England also helped, saying it would cut interest rates at least once next year.

One bank didn't fare so well. Alliance & Leicester slumped more than 6 per cent on rumours it had had a line of credit pulled, but rallied slightly with traders saying the story was unlikely. The stock still closed down 3 per cent at 669p.

It has been a poor few days for the miners, but they helped lead the FTSE 100 up yesterday. Lonmin was stronger on its full-year numbers, despite underlying profits falling 5.7 per cent. The rising price of metals bolstered results hit by operational issues, and the stock closed 4 per cent higher at 3,200p.

Another riser was Friends Provident after it announced the departure of its chief executive and the launch of a strategic review. The stock climbed 5 per cent to 167.5p with traders suggesting the reason for Philip Moore's resignation was his failure to merge the group with Resolution.

The oil giant BP steamed ahead 2.8 per cent to 599.5p after it reported a major gas discovery in Azerbaijan. One market expert said the find strengthened the whole sector.

The FTSE 100 stormed 98 points higher in the morning, taking the lead from the surge in New York overnight. It retreated to close 69.7 higher at 6,432.1.

On the downside, the supermarket group J Sainsbury was hit after reporting its interim results. The stock closed 3 per cent lower at 413p despite reporting profits near the top end of expectations. Chief executive Justin King said that consumer spending going forward could be affected by the credit crunch and interest rate rises.

Balfour Beatty was flying high on the mid-tier after an unexpected announcement that its full- year results "will be somewhat higher than previously expected". The brief statement prompted ABN Amro to upgrade its rating to "buy" from "add", with the shares closing up 8.1 per cent at 488.5p.

Among the mid-cap losers was the insurer Amlin, despite saying its full-year results would beat expectations and its decision to return about £120m to shareholders. It lost 4.9 per cent to 313.5p.

The equipment rental company Ashtead Group closed down 1.6 per cent at 95.5p and there was talk it could sink even lower. This was supposedly based on the read across from reports that Cerberus Capital Management was to pull its $4bn takeover of Ashtead's rival United Rental in the US. The private equity company is supposedly worried about the group's economic outlook.

One strong riser was the gas storage group Star Energy, which shot up 28.2 per cent to 360p after a takeover bid by Petronas. The Malaysian state-owned oil company lodged a 365p-per-share cash bid. Star is consulting advisers, and some market experts suggested it might encourage rival bidders to spark an auction.

It was overtaken at the end of the day by Encore Oil, which has a farm-in deal with Star Energy. It is set to spin off its gas storage business into a separate company, sending the shares 30.6 per cent higher to 27.75p.

Traders are expecting some good news in GVM Metals as the shares continue to rise. The small-cap miner has almost doubled since August and closed up a further 1p to 65p yesterday. This despite directors selling stock this week.

Down in the basement, Nestor Healthcare shed more than half its value to close at 39.25p. It fell after warning that profits could be up to 20 per cent lower than expected and it would not meet one of its banking covenants.

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