Market Report: Scottish Power surges on talk of imminent bid

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Analysts have for some time suggested that the remainder of the group would make a good acquisition for Scottish & Southern Energy and Germany's Eon, although the duo would certainly face significant regulatory hurdles. Yesterday, a new version of the Scottish Power bid story did the rounds. It talked of a possible offer for the company before Friday's shareholder meeting, which has been called to rubber-stamp the PacifiCorp sale.

According to this theory, such a move is aimed at scuppering the disposal and taking control of the whole group. Since Scottish Power secured the deal with Mr Buffett, US power prices have risen and analysts expect their march higher to continue for some time. This can only enhance the attractiveness of PacifiCorp. But muscling in on the deal with Mr Buffett will be expensive, given the hundred million-pound break fee that Scottish Power will have to pay him should the transaction not go through.

Elsewhere in the FTSE 100, Scottish & Newcastle dropped 4p to 475p on news of SABMiller's $7bn bid for Colombia's Grupo Empresarial Bavaria. Many in the Square Mile had been hoping SAB would buy Scottish & Newcastle instead of the Latin American brewer. Hedge funds were happy to see ARM Holdings cut its sales growth forecast for the current year. The news left shares in the semiconductor designer down 5p to 115.5p. A number of hedge funds had built up sizeable bear positions in ARM before its results, and profited in a big way yesterday from the setback at the company. At one point during session, ARM stock traded as low as 112.25p.

Matalan jumped 14p to 205p in heavy volume as rumours of a bid for the discount retailer once again did the rounds. The talk was particularly strong at the start of the session and helped Matalan hit a high of 215p in the morning. But as the day wore on punters lost their ardour for the story. Wal-Mart was mentioned as the most likely buyer of the company and some even tipped Baugur as a possible bidder. However, the Icelandic retailer was quick to play down the story. Its chief executive, Jon Asgeir Johannesson, is facing fraud charges in Iceland and has said he will not launch major deals unit he has cleared his name.

Invensys added 1.25p to 13.25p as Dresdner Kleinwort Wasserstein upgraded its stance on its engineering conglomerate to "buy" from "hold". The move by the German broker came after Invensys unveiled the £134m sale of its Lambda power supply unit.

Among small-caps, a number of sizeable stakes changed hands. IFX Group, which owns the spread betting firm Finspreads, rose 1p to 104.5p after a 14 per cent stake in the company of 4.1 million shares crossed the market at 104p. In the past, the Tchenguiz brothers have been rumoured as being interested in buying a substantial stake in IFX while Shore Capital, the stock broker, has been talked of possibly acquiring the whole company.

Christian Salvesen, steady at 68.25p, saw Arbuthnot Securities pick up a 4 per cent stake in the logistics group of 11 million shares on behalf of a client at 70p. Meanwhile, the US cash machine operator TRM upped its stake in Moneybox, unchanged at 43p, to 9.03 per cent. Cardpoint bid 43p a share in cash for Moneybox this month and, according to analysts, TRM's move to up its stake in the group makes a counterbid from the Americans more likely. BetonSports ticked 1.5p lower to 135p as word spread that Evolution Securities is looking to sell a stake of 23 million shares in the gaming company on behalf of a client.

Empire Online gained 3.5p to 200p on talk that the marketing specialist to the online casino industry had enjoyed record trading last month. Bright Things improved 2p to 149.5p on hopes that the educational consoles developer is close to securing a distribution deal in the US. Pursuit Dynamics jumped 3p to 205p as traders bet that the technology group will soon unveil a contract win from the US Navy. Pursuit has a developed a revolutionary fire-safety product which it claims is much more efficient than the alternatives. Gulf Keystone Petroleum rose 1.5p to 71p after the purchase of 50,000 shares by Todd Kozel, the oil explorer's chief executive.

Finally, Minoan Group, the Ofex-listed leisure complex developer, rose 1p to 55.5p after unveiling a deal with the Professional Golf Association for the management of its gold courses in Crete.