Market Report: Takeover talk returns to liven up Woolworths

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The Independent Online

Shareholders of the general retailer Woolworths can be forgiven for feeling a bit of takeover fatigue, given the number of times the company has been linked with a bidder only for it to struggle on alone.

The word in the mid caps is that another bid for Woolworths is on the way, although investors perhaps should not get too carried away. The speculation is that the top price on the offer is 40p per share, valuing the company at £683m including debt. The company has recently launched an operational review that is expected to result in dozens of store closures but the speculation now is that the review will result in the company being taken into private hands.

Christmas trading was not as bad as some rivals but a 4.6 per cent drop in like-for-like sales did not send the stock into freefall. Baugur, the Icelandic investment group that owns 10 per cent of Woolworths shares, could launch a bid, but some traders believe it is prepared to sell out without demanding a huge premium. Despite a weak market, Woolworths nudged 0.75p firmer to 33p.

Still on the rumour mill, the word among traders is that a mystery buyer is busy building a stake in Sainsbury's, the UK's third largest food retailer by sales. Although the shares slid 3.75p to 441p, there has been vague buyout speculation for a while but investors cannot seem to decide which is the better bet - Sainsbury's or Morrison Supermarkets. Most of the money is on Morrisons, 3.25p worse at 284p, with founder Sir Ken Morrison set to leave the company early next year.

Indian copper and zinc group Vedanta Resources found plenty of sellers as rumours about a takeover bid continued to fall of deaf ears. Executive chairman Anil Agarwal still owns more than 53 per cent of the stock so unless he decides to call it a day - and there is little sign that he is considering quitting - a bid is a long shot. Shares in Vedanta shed 40p to 1,150p.

Shareholders of Drax Group, the coal-fired electricity generator, will want to forget the last six months but things could get worse if research from JP Morgan turns out to be right. The US investment bank believes the earnings outlook for Drax is getting worse due to falling utility prices, slashing its target price to 645p and giving the shares an "underweight" recommendation. Drax shares lost another 27p to 719.5p.

London shares gave back more than half of Wednesday's gains as brokers took some profits off the table. Miserable numbers from Ford sent the Dow Jones more than 40 points lower in early deals and there was little to encourage London traders to put more money into the market. The FTSE 100 closed 45.5 lower at 6,269.3.

Second-line property stocks were in demand as US investment bank JP Morgan published a bullish update on the sector, recommending that investors maintain overweight exposure. The broker's top pick is Great Portland Estates, 25p better at 710p, another new all-time high. JP Morgan also likes Brixton, 11p firmer at 543p after a mild bout of afternoon profit-taking. The shares had been as high as 555p.

Analysts must have had a good time on a site visit to Ashtead Group's Florida operations. The plant hire group has been entertaining analysts in the sunshine state for the last few days and UBS, Citigroup and Evolution Securities urged clients to buy the shares. Swiss investment bank UBS was particularly bullish, giving the shares a 220p target price, sending the shares 3.75p better to 178.75p.

Abraxus Investments surged 2.5p to 6.62p after a significant transaction that resulted in 20.9 million shares changing hands during the session. The majority of the stock was traded at 6.5p, a decent premium to Wednesday's close, indicating a significant buyer is interested in building a major position in the stock.

Alternative energy stocks have been in focus since President Bush's State of the Union address and its implications for a more sustainable energy policy. But there have been rumours surrounding Ceramic Fuel Cells since before the speech and the word is that there may be a buyer lining up a bid for the company that may value the shares at up to 80p. The average daily volume for the shares is just under 900,000 and more than 6.5 million were traded yesterday, pushing the price 3p better to 50.75p.

Finally, Designer Visiongave investors a grim profit warning that saw the shares collapse 2.77p to 1.35p, a fall of more than 67 per cent. The company blamed withdrawal of orders in its retail unit from a major global customer, thought to be the US retail giant Toys R Us.