Market Report: Takeover bid hopes help to revive Debenhams

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The Independent Online

Traders were feeling cautious in the run-up to Christmas, and corporate news remained sparse yesterday. Following the previous day's bloodbath, there was little evidence to convince the bears that the selling spree was over.

A dead cat bounce lifted the retailers, with Debenhams one of Monday's high-profile casualties the pick. The stock has dropped off a cliff following a bearish note from Seymour Pierce, but rebounded on talk of stake building.

The fashion retailer disclosed that Milestone Resources had upped its stake in the company to 7.3 per cent after the markets shut on Monday. Reports in the morning linked the investment vehicle with Mahesh "Micky" Jagtiani, the chairman of Landmark Group. The shares soared 8.28 per cent to 81.75p as traders hoped the stake building was a prelude to a bid.

While the FTSE 100 just about stabilised after the previous day's massacre, it was unable to hold on to its 66.5-point gains in the morning. It weakened to close 1.5 points up at 6,279.3.

The best performer was the London Stock Exchange, up 2.66 per cent to 1,855p. The shares have enjoyed a 31 per cent bump in the past three months as much of the market tottered under the weight of the credit crunch. Citigroup said the rises had been driven by investment from sovereign wealth funds, strong second-half volumes and sector rotation. The US broker upped its target price to 1,825p from 1,650p, saying the stock was "still delivering volume surprises".

Another sweet riser was Cadbury Schweppes, up 15p to 623p following further stake building from Nelson Peltz. The activist investor's vehicle Trian Fund Management raised its stake in the confectioner from 3.5 to 4.5 per cent. It reportedly said Cadbury's shares were undervalued, but added if the company did not progress next year it would become more active.

Tuesday proved another weak day for the banks, with Northern Rock propping up the table, down 5.49 per cent to 86p. It was closely followed by Alliance & Leicester, 3.49 per cent weaker at 635p. This came as Moody's Investors Service said it had put the banks' debt ratings under review, pending a possible downgrade.

Investors were switching over from ITV as JP Morgan cut its earnings-per-share forecasts, driven by the increase in net financial costs. It added that WPP offers a more balanced way to play UK advertising, sending ITV's shares down 1.43 per cent to 82.9p.

The leader on the mid tier was the support services group Aggreko, as it impressed the market with a trading statement. The shares rocketed 94p as it revealed full-year results would be "somewhat ahead of current market expectations". Oriel Securities backed the statement, saying it "should revive confidence in the group's growth prospects". It closed up 59.5p at 505.5p.

Tradus, formerly known as QXL Ricardo, recommended a 946m bid from the media company Naspers, sending the shares 12.04 per cent higher to 1,815p. There was some expectation that the bid could spark a takeover battle. Talking of which, Abbot Group rose 2.75p to 334p on hopes that the private equity takeover battle for the group was in the final straight.

The power company Drax Group weakened 6.8 per cent to 623.5p as it shelved refinancing plans due tothe choppy conditions of the credit markets. Dresdner Kleinwort said: "Despite progress on the forward contract book, we believe today's trading statement will bode negatively for Drax."

A trading statement also proved a body blow for Bodycote International, as it slumped 10.22 per cent to 180p, the worst on the second string. Numis Securities cut its price target from 270p to 240p in response, saying the shares would remain under pressure.

Millwall may be languishing at the foot of League One, but the Lions' share price roared to the top of the small-cap table yesterday. The tiddler holding company's share performance has been worse than its team's recently, but it rose 65 per cent to 0.0165p as aggressive buying lifted the stock.

The financial IT group Danka Business Systems strengthened as trading started in its American depository shares on Nasdaq's over-the-counter bulletin board. Investors said "Danka very much" as the price lifted 31 per cent to 3.93p.

Bargain-hunting lifted the dry cleaning group Johnson Services. The group has, um, been taken to the cleaners after profit warnings and fears it would breach its banking covenants. It lost 85 per cent of its value between October and November, but rallied yesterday to close 13.19 per cent higher at 40.75p.

The squeeze among the clothing retailers hit Slimma, which fell into a full-year loss because of "an extremely challenging trading climate". The shares crumpled a third to 17p.