Market Report: Takeover talk sparks plant hire group Ashtead

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The Independent Online

Last year, mid-cap companies outperformed the blue chips by the best part of 16 per cent, a staggering amount of outperformance given the FTSE 250 is a much broader index. The main reason for the performance of the mid caps was bid speculation, and if talk that plant hire group Ashtead is in takeover discussions proves to be correct the trend could continue.

The word among traders is that the company has been engaged in talks with a private equity company for a number of weeks and that a deal could be reached valuing the shares at 205p. The word is that US industrial giant GE could also be involved and that a deal would be all-cash. Despite the takeover talk, shares in Ashtead ended the session in the red, closing 0.75p worse at 158.75p.

In the blue chips, Next surged on the back of a bullish update from broker Merrill Lynch after Thursday's trading update. The US investment bank reiterated its "buy" advice and 2,100p price target, sending the shares 84p better to 1,940p. Elsewhere in retail, Marks & Spencer lost 2.5p to 734p before its own Christmas update, due on Tuesday.

Publishing giant Reed Elsevier has been widely tipped as a stock to watch this year, and rumours of a bid from Dutch rival Wolters Kluwer helped the stock climb 21.5p in early deals to 588.5p. A mild bout of afternoon profit-taking saw the shares close 11p firmer at 578p. The stock has been a long-term underperformer against the rest of the market and some traders believe that a buyout and management shake up could be likely.

Goldman Sachs reiterated its "sell" advice on BG Group despite upping its price target for the shares to 650p, sending the stock 24p worse to 650p. The influential US investment bank thinks BG is trading at a significant premium to its peers and that the company is overexposed to the US gas market. Elsewhere in oils, BP's woes continued with a 5.5p decline to 557p before next week's trading statement, while Shell shed 49p to 1,732p as UBS cut its price target to 2,050p.

Tuesday's storming start to 2007 trade seems like a long time ago as London shares were on offer thanks mainly to stronger-than-expected US jobs data, in effect writing off the chances of an early rate cut. The FTSE 100 closed the week 66.9 worse at 6,220.1.

Weak commodity prices continued to hurt mid-cap oil and mining stocks. Venture Production, off another 38p to 789.5p, has now fallen almost 14 per cent since the start of the year. Tullow Oil and JKX Oil & Gas, down 17.75p to 373p and 17.5p to 270.5p respectively, are not far behind. In the miners, Randgold shed 64p to 1,096p but Aquarius Platinum, boosted by Thursday's bullish note from Citigroup, again managed to beat the rest of the sector with a 17p loss to 1,059p.

Traders expect a bullish update next week from online estate agent Rightmove, 29p better at 400p. The statement has been put forward to Tuesday, normally taken as a sign that trading has been strong. Recent highly priced buyouts in the US have also encouraged buyers of Rightmove, and KBC Peel Hunt upped its target price for the shares to 440p yesterday.

Investors overlooked the cancellation of flights from Bristol airport and another round of name-calling at Ryanair to boost discount airline stocks. The falling cost of fuel plus the expectation of strong passenger numbers from easyJet next week helped its shares rally 16p to 652p, a new all-time high, while Ryanair added €0.17 to €10.95.

There has been a buzz around Commoditrade for most of the last year, and the word among small-cap traders is that an announcement about a possible takeover could be made next week. The company confirmed on 7 December that it was preliminary discussions that could lead to an offer being made but more detail has not emerged. Market makers reported solid two-way business yesterday as the stock closed 1.75p better at 32.5p.

One of the star small-cap performers over the last couple of years has been Clipper Windpower. Citigroup placed a line of 3 million shares in the market yesterday at 585p, 15p below Thursday's close, despite the company confirming an order to supply 60 megawatts of turbines for a joint venture 85 per cent owned by BP. The shares closed 2.5p weaker at 597.5p.

There was a strong start to trading at West African Diamonds, which made its AIM debut yesterday after spinning out of parent group African Diamonds. The shares closed at 24.5p, giving new shareholders a sparkling 22.5 per cent premium.

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