Market Report: Takeover rumours circle Evolution Group

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The Independent Online

The brokers remained very much in focus yesterday as talk of a potential bid for Evolution Group intensified. Traders were chattering excitedly over the pros-pect of a 150p-per share offer from an unnamed suitor late in the day. On Monday, Evos had jumped on rumours that Collins Stewart was running the slide rule over it. It was up a further 5p yesterday, although weakened to close 0.5p up at 104.5p.

The money brokers have been under in the consolidation spotlight since Cenkos Securities and Landsbanki launched a joint bid for Close Brothers last week.

The market posted a second consecutive day of losses, slumping 68.4 points to 6,291.2. There were few in positive territory in the morning, with bargain hunters propping up a sickly list of risers.

Top early on was J Sainsbury, which has taken a pasting ever since the Qatari-backed investment fund Delta Two walked away from its £10.6bn bid. It rose 1.73 per cent yesterday to close at 412.25p. It was overtaken by three other stocks at the end of the day, with Vedanta Resources finishing strongest, 3.88 per cent higher at 2,060p.

The market had a brief rally at lunchtime with Rio Tinto surging back up the tables as rumours swirled around its potential tie up with BHP Billiton.

Traders heard BHP was set to up its three-for-one share bid to three and a half. As sources close to the deal denied the story Rio tumbled. It finished 40p down at 5380p.

The banks once again led the market down with the increasingly beleaguered Alliance & Leicester the worst on the day. The group, which has been battling off rumours of write downs and profit warnings this week, fell a further 6.33 per cent to 607p. At one stage the stock fell so fast it was suspended, similar to Barclays last week.

Barclays itself had avoided the worst of the previous day's falls, but was down yesterday after Goldman Sachs cut its target price to 627p from 657p. The broker said: "The uncertainty over the outlook for earnings and in particular those of BarCap continues to rise," which sent the shares down 4.05 per cent to 509p. Fitch also cut its outlook on the bank from stable to negative.

Traders were looking nervously at Man Group as one said the stock was being aggressively shorted. He said the amount of its stock out on loan has soared to 16 per cent, "which doesn't bode well". It closed down 13p at 527.5p.

Citigroup slashed Land Securities Group's target price from 2,000p to 1,650p sending it spiralling 2 per cent to 1469p. The broker said it was worried that the company split won't happen for a year, after it announced it was waiting for favourable market conditions to carry out the plan.

Elsewhere in the sector, British Land was also down on a bearish note of its own. It fell 2.47 per cent to 889.5p as Lehman Brothers cut its target price following the previous day's interims.

The mid-caps risers were predominantly bolstered by broker support. Top of the pile was Beazeley Group, up 6.7 per cent to 155.4 after Credit Suisse put an "outperform" rating on the stock. In the same sector, the Swiss broker downgraded Amlin to neutral after it announced it would return £120m of capital to shareholders. Amlin fell 9p to 300.5p.

There was some talk of takeover interest in Hunting, the oil equipment group, just as the session closed. The stock rose 1.86 per cent to 713.5p on rumours of a potential £9 per share bid. Also in the sector Wood Group rose 1.25p to 407.5p as it sealed the deal for IMV Corporation for $140m. It said the buy was a "key strategic move into the Canadian heavy oil market".

Still spiralling was Minerva, the real estate group, which fell 5.73 per cent to 168.75p. Earlier this week there was rumours of stakebuilding, followed by the inevitable talk of a bid. As takeover news failed to appear, investors have hammered the stock since Thursday.

Office rental company Regus Group fell 4.44 per cent to 86p on talk that Dresdner Kleinwort had placed 20 million shares at 86p.

It seems Severstal is on the prowl for another small-cap miner after it successfully secured Celtic Resources last week.

The latest company in the Russian steel giant's cross hairs is Highland Gold & Mining, which rose 16.03 per cent to 135.75p on the news. Panmure Gordon was also up on reports that a "well known Russian billionaire" wants to build a stake in the group. It closed up 8p at 123.5p.

Another riser was Nautical Petroleum, 10.42 per cent higher at 13.25p after it hit oil in the North Sea.

On the downside, Dawson International slid 16 per cent to close at 2.6p after it warned on profits. The cashmere and bed linen group said issues in its home furnishing division, lack of demand in the cashmere yarn market and the weakness of the dollar would hit its profits.