Market Report: Takeover talk breathes life into JJB Sports

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The Independent Online

The meteoric rise of JJB Sports shares has been the main talking point among those who bet on the retail sector this week. The stock has risen by 10 per cent this week alone, and by a whopping 28 per cent since the end of the summer.

Persistent rumours of a takeover bid for the sports retailer from private equity are part of the reason for the strength in the stock. However, analysts believe this is an unlikely scenario while the executive director David Whelan, who founded the company and remains a major shareholder, is still alive.

Behind the interest in JJB shares more recently has been talk that new policies from Adidas and Nike are likely to benefit the company. The two sportswear makers are believed to be planning to limit supply of certain products to stores that meet strict criteria. JJB, with its "Serious About Sports" motto, fits in well with these plans.

In fact, over the next 18 months, JJB will refit three-quarters of its 400 stores with new "shop-in-shop" areas for Adidas and Nike, to enhance its credentials. But pile-'em-high, sell-'em-cheap retailers, such as itsrival Sportsworld, will miss out on certain products unless they change their spots.

Profit-taking left JJB 0.25p lower at 230p yesterday. Among those who locked in gains from the shares was Harris Associates, the US fund management giant, and Mr Whelan's daughter Jayne, who sold 1.5 million shares at 227p. Analysts believe next year is set to be a difficult one for the company which will be up against very tough comparatives - this year saw its sales figures boosted by the World Cup.

Elsewhere in the retail sector, Next dropped 20p to 1,864p, Ted Baker fell 5p to 597.75p and AllianceBoots lost 1p to 806.5p. Home Retail Group, the owner of Argos and the do-it-yourself store chain Homebase, lost 6.5p to 419p as hopes of a bid for the company faded. The private-equity giants Blackstone and Kohlberg Kravis Roberts have long been touted as possible bidders for the group. In fact, the duo are said to have considered a move on the chains in July. However, they are not thought to be working on such a deal at present.

Meanwhile, the wider FTSE 100 was also in retreat. The index of London's leading shares fell 20.3 points to 6,140.0 in what was a quiet session because both Wall Street and Tokyo were closed for public holidays.

ICI soared 12p to 435p as brokers applauded Wednesday's sale of Quest, its flavours and fragrance business. Among them was Deutsche Bank which said the company had secured an excellent price for the division. It will use £230m of the net proceeds to pay down pension liabilities and the remaining £900m is earmarked for acquisitions of paints and adhesives businesses. However, Deutsche suggested there is a good chance ICI will attract takeover interest.

Enterprise Inns was the best performer in the blue-chip index, gaining 38p to 1,205p, after Citigroup and Merrill Lynch upgraded their forecasts for the pubs operator. Citigroup said it was confident Enterprise can deliver double digit earnings growth and argued that its shares are attractive at current levels.

Lower down the pecking order, Monstermob slumped 3.25p to 47.75p despite the company insisting it is locked in takeover negotiations. It is rare to see such a price movement from a company that says it is in bid talks. However, investors are worried that the mobile content provider plans to restructure its outstanding earn-out obligations - the result of an acquisition spree - and that this could undermine its value.

Eurovestech rose 0.5p to an all-time high of 18.75p amid heavy institutional demand. More than 10 million shares of the AIM-listed, pan-European, technology investment firm were traded. Eurovestech has made a name for itself because of its involvement with the online market research firm ToLuna, also listed on AIM. It provided ToLuna with £2m-worth of seed capital in May 2000, which is now worth about £40m.

Renold gained 3.5p to 98.5p after the chain maker posted strong interim results. Pre-tax profits at the group soared to £3.4m, from £600,000 in the previous year, and it said the second half of its financial year should see a continuing improvement on the back of increased orders and lower costs. Also boosting sentiment towards the stock was the purchase of 10,000 shares at 94p by Robert Davies, Renold's chief executive.