Market Report: Signet sparkles on talk of private-equity swoop

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Another day, another bid story in the retail sector. Despite evidence that nervous and indebted consumers are keeping their purses shut, private-equity houses' appetite for acquisitions remains undimmed, if the latest City gossip is to be believed. And yesterday it was Signet Group, the transatlantic jewellery retailer which was the focus of speculators' attention.

The group owns Ernest Jones and H Samuel in Britain, but it makes two-thirds of its revenue in the US, where it is expanding fast, beefing up its offering of diamond jewellery and advertising heavily. The strong profits growth in the US, revealed at the interim results in August, compensated for poor trading in the UK, where operations have slipped into the red.

There was some speculation yesterday that the ultimate aim of a private-equity bidder would be to split the group into its two geographical parts. Analysts cautioned this was unlikely now the sheen has come off the UK business, and others worried that a bidder would be put off by the rising cost of gold and jewels, which must be pressuring Signet's margins and damping demand. None the less, the company's shares jumped 2.25p to 103.25p in twice the usual volume of trading.

Several other bid stories spluttered into life, as traders saw the market heading into positive territory again after two weak sessions and regained some enthusiasm for a punt. Whitbread ended up 14.5p at 952p on talk that it will soon receive a long-mooted break-up bid. The conglomerate owns disparate businesses including Pizza Hut restaurants, Premier Travel Inn hotels and David Lloyd Leisure health clubs. The most wild-eyed yesterday predicted a predator would come in with a £13-per-share bid.

Ricardo, the car parts business, was up 12p to 307p on talk that GKN (up 3.5p at 278p) would make a bid. And Boots was up 6.5p to 626p in the hope of an imminent and forecast-beating sale of its healthcare products arm.

Aegis was also heavily traded, in the expectation that Publicis of France (which outed itself as the bidder yesterday) would pay more than its indicative offer of 140p a share. Publicis is being advised by the corporate finance team at UBS and, over the other side of a Chinese Wall, the Swiss investment bank's marketing sector analyst argued Publicis and others could pay 155p and still find the acquisition immediately enhancing earnings. Aegis shares fell 1.5p at 143.5p.

These spots of bid chatter made the trading day appear more exciting than it truthfully was. Volumes were well down, and investors are going to wait until Hurricane Rita has passed before making big bets. The FTSE 100 closed at 5,385.7, up 16 points, but small- and mid-cap stocks ended lower.

It was oil that made the difference for the FTSE 100, since the heavyweight BP rose 5p to 668p, despite a rumour it was about to bid upwards of £24bn for Repsol of Spain. Royal Dutch Shell was up 19p to 1,933p, and Cairn Energy jumped 33p to 2,018p as the hurricane again pushed up the price of oil. It also sent a shiver through the insurance sector, still counting the cost of Katrina. Catlin, off 30p at 435p, Wellington Underwriting, tuppence lower at 106p, Brit Insurance, off 2p at 87p, and Advent Capital, 3.5p lower at 30.5p, were among the underwriters hit.

Old Mutual came out top of the FTSE 100 performance league in anticipation of the capitulation of the Skandia board, which is meeting today to decide whether to accept Old Mutual's £3.2bn offer for the Swedish life assurer. The City hoped that Fidelity's intervention - the fund manager had upped its stake in Skandia to 9 per cent and written to the riven board to demand it accepts the deal - had tipped the balance. That would spare Old Mutual a strategic U-turn or, worse, the need to raise its bid. Its shares were 3.75p better at 137.75p.

Not so clear a City view on Kingfisher, the owner of B&Q, whose shares swung from positive to negative territory and settled flat at 222.25p. Some investors thought B&Q's poor trading is now fully reflected in the share price, but Kingfisher's own broker argued the shares will be off most people's buy lists for some time to come. Tony Shiret, an analyst at CSFB, said Kingfisher could well have to curtail B&Q's overseas expansion plan, because it may not otherwise have the money to invest in sprucing up the ailing UK chain. Either halt the growth abroad, other observers said, or cut the dividend.

The three senior executive at CSR, the soaraway Bluetooth microchip company, cashed in share options, paying, in some cases, as little as a fraction of a penny and selling stock at 690p. The trio, including the chief executive John Hodgson, shared a jackpot estimated at about £5m. CSR shares fell 27p to 659p.

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