Market Report: Takeover speculation breathes life into Rexam

The excitement seems to have been prompted by the performance of Rexam's credit default swaps. These derivatives give the owner insurance against a debt default by the company, and their value has risen sharply in recent days. Market professionals pointed out that Marks & Spencer's credit default swaps soared in a similar way before Philip Green's private-equity-type offer for the group last year.

A private-equity bid for Rexam will see the group's balance sheet loaded with debt, making a default by the company more likely and insurance against such an eventuality more valuable.

Analysts argued that the can maker's impressive cash flows could certainly support a private-equity-type bid for the company. But they also said that Rexam might be planning a major debt-financed acquisition, which would also explain the sudden rise in the price of its credit default swaps.

By the close of business, Rexam was the second best-performing blue-chip stock in London. Cairn Energy, 90p higher at 1850p, was the best. The Scotland-based oil and gas explorer was boosted by suggestions that its Indian oil assets may contain more crude than first thought.

Elsewhere in the sector, Dana Petroleum fell 40p to 855p after the group raised £34m through a placing of new shares at 870p. Dana will use the cash to fund its recently acquired assets in Algeria. An intense period of exploration activity is on the way at the group. Analysts expect Dana to dig six exploration and appraisal wells in the next four months.

The FTSE 100 index lost 16.3 points to close at 5,423.5. Nevertheless, Deutsche Bank suggested there are good times ahead for equity investors. The German broker raised its year-end target for the FTSE 100 to 5,600 from 5,500, and set a 2006 target of 6,000, which is 10 per cent more than current levels. Deutsche favours the retail, banking and oil sectors. Of the three it believes retail is most oversold and advised its clients to start building positions in this part of the market.

Meanwhile, Hays dropped 2.5p to 118.75p on talk UBS had sold 48 million shares in the recruitment group at 118.5p on behalf of an institutional client. J Sainsbury added 7p to 291.25p as dealers reported whispers that Brandes is looking to add to its shareholding in the supermarkets group. At the latest count, the US fund manager controlled 12 per cent of the company. Woolworths built on its recent gains, adding a further 1.25p to 35.25p, as a growing number of punters piled into the retailer, convinced that it is about to receive a bid approach.

Intertek was boosted in the morning by hopes the group will not remain as an independent entity for much longer, but lost ground in the afternoon as word spread that Credit Suisse First Boston had downgraded the stock to "neutral" from "outperform". Although the broker admitted that a bid for Intertek from its Swiss rival SGS would make sense, it pointed out that a spokesman for Intertek was recently quoted as saying the company knew of no reason for the strong jump in its shares over the past few weeks. Intertek closed 3p higher at 749p, having traded at 767p at one point during the day.

At the small-cap end of the market, BTG ticked 3.5p higher to 218.5p after reporting substantially reduced first-half pre-tax losses. Market professionals said Louise Makin, its new chief executive, has done well to boost royalty revenues and cut costs. Vane Minerals rose 0.75p to 12.75p, thanks to a bullish update from its copper prospect in Mexico.

Finally, Game gave up a further 1.75p to 82.75p on rumours Sony may apply a patent to its PlayStation 3 games that will prevent them from being played on any other console than the one on which they are first run. Sony's technology will allow an authentication code to be read and then rendered unreadable on other machines.

If true, this will be very bad news for Game. The retailer makes a large portion of its profits by selling second-hand computer games and consoles. Analysts estimate that second-hand software and hardware accounts for between 15 and 20 per cent of Game's shelf space.

Some analysts were sceptical that Sony would introduce such a measure. They said that it could backfire on the Japanese group because if implemented it is likely to reduce purchases of new games. In many, these are funded by consumers trading in old games in return for discounts on new releases.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue