Market Report: Takeover talk breathes life into Tomkins

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Talk that a private-equity group may be poised to launch a takeover bid for Tomkins Group propelled it to the top of the mid-cap leader board. The company, once famous for being the "guns to buns" owner of Smith & Wesson and Rank Hovis McDougall, is now an automotive engineering group.

Traders are not convincedan offer will come from a private-equity source. Rather, the word is that the former chief executive Greg Hutchings has made an approach through Lupus Capital, the oil services group of which he is the chairman. Mr Hutchings left Tomkins under something of a cloud, after allegations of inappropriate use of corporate perks. What Tomkins shareholders would make of his return is anyone's guess, but presumably most are fairly pleased with yesterday's 17.5p rise to 250.5p.

The Indian miner Vedanta Resources led the FTSE 100 fallers for most of the session as the price of copper fell again. The company also operates in Zambia, and last week's election was full of anti-foreign mining rhetoric, and the Indian stock market has been in the doldrums over the past few months. The shares fell 34p to 1,178p before some late buying pushed them back to 1,211p, a penny worse. Fellow copper mining group Antofagasta was also out of favour, 7.25p worse at 456p.

The perpetual takeover candidate Lloyds TSB firmed 3.5p to 556p, despite a note from the broker Dresdner Kleinwort trashing the possibility that a US bank will make a play for the group. In a note to clients, the broker says only five US institutions have the capacity to bid for Lloyds, but that does not mean any of them will. The broker points to regulatory hurdles, the group's £2.8bn pension deficit, the largest of its competitors in relation to group earnings, and the lack of "transformation opportunities". Dresdner reiterated its "reduce" advice with a 490p target price.

London shares traded in a tight range for most of the session, with little incentive for traders to take positions ahead of the weekend. Of the major sectors, mining stocks were mixed, banks were better and oils weaker, with the FTSE 100 ending the week 3.3 worse at 6001.2. Severn Trent, on its last day of trading before the demerger of waste subsidiary Biffa, closed 33p better at 1,417p, while GUS continued to attract support ahead of Monday's listing of Experian, the consumer credit agency. GUS closed another 5p better at 990.5p.

The steel maker Corus nudged 7.25p firmer by the close to 481p, but traded as high as 490p earlier in the session, a six-year high. Investors are still waiting for more news on the Tata Steel takeover, but news that the Russian steel giant Severstal will list in London got traders talking about a counter offer. Severstal, with an expected market capitalisation of up to $14bn (£7.5bn), is far larger than Tata and traders said the company has deep enough pockets to trump any offer the Indian group makes.

The online and catalogue fashion retailer N Brown reports first-half numbers next week, and strong buying interest saw the shares gain 8p to 246.5p. The word in the market is trading has been strong in the past six months, as the firm benefits from increased internet shopping and its emphasis on larger sizes. The stock has been among the best performers in a struggling clothing retail sector, adding more than 60 per cent in the past 12 months.

It is two months since Morgan Crucible confirmed it has received a tentative takeover approach. Since then, the silence from the company has been deafening, leading investors to bank some profits. However, the talk is that details of the bid will surface in the next couple of days, with some traders predicting a price tag of up to 330p for the ceramic and magnetic components manufacturer. The shares rose 4.75p to 289.75p.

In the small caps, internet gambling stocks rallied on talk that US legislation may not impact gaming, only sport gambling. However, most traders dismissed the talk - "utter nonsense" according to one market maker - and the rally could be short-lived. Fairground more than doubled to 18p, up 10p, and World Gaming added 55 per cent to 7.75p, 2.75p better.

A "strong buy" recommendation following Local Radio's results earlier in the week from the broker Charles Stanley helped the shares add 3.75p to 20.5p. However, despite yesterday's gain, they are still trading at about 20 per cent of their October 2005 valuation.

The small-cap disaster of the day was Pursuit Dynamics, down 33p to 70.75p. The steam propulsion-engineering group reported full-year earnings substantially below market forecasts.

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