Market Report: Talk of bid prompts thirst for Whitbread shares

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The Independent Online

Talk of a 1,700p per share bid for Whitbread from the private equity real estate group Starwood Capital sent the shares sharply higher in early deals before a bout of afternoon profit-taking saw the stock close at 1,439p, 16p better on the session and another all-time high. Traders said that the bid talk started on Wednesday when the stock went ex dividend but still closed higher. Whitbread appears to be in rude health; only last week the company reported a 20.8 per cent jump in first-half profits and a £350m return of capital to shareholders.

After a tough week of trading the pharmaceutical giants AstraZeneca and GlaxoSmithKline were buoyed by bullish global sales forecasts published in the IMS Health Report. The report says that pharmaceutical sales will grow by 5 to 6 per cent in 2007. Glaxo, up 22p at 1,414p, was also boosted by an upgrade from the broker JP Morgan, which upped its stance on the shares to "neutral" from "underweight" with a 1,425p price target. Meanwhile, AstraZeneca added 48p to 3,200p after upgrades earlier in the week from Morgan Stanley and Nomura.

Shares in Yell Group, the directories publisher, have been among the top performers in the blue-chip index over the past 12 months, adding almost 40 per cent. Citigroup, the US investment bank, believes that there is more upside left in the shares as it urged its clients to keep on buying. The company remains Citigroup's favoured play in the media sector as the stock closed 2p firmer at 620p.

In the wider market, London shares were flat with weakness in the mining sector offsetting stronger retail and household goods stocks. The FTSE100 closed 0.3 lower at 6149.3.

Top of the blue-chip fallers was healthcare group Smith & Nephew, as it surprised the market by confirming merger talks with the US group Biomet. Investors are concerned that any deal may require an issue of new equity in order to raise the cash to pay for the deal. The news overshadowed third-quarter results that were slightly ahead of most forecasts, sending the shares 21.5p worse by the close to 487.75p.

High on the mid cap leaderboard was F&C Asset Management, after two days of heavy selling following on from Tuesday's poorly received numbers. The shares climbed 9.5p to close at 189.75p. There have been a handful of takeover rumours in the past, but most traders put the rally down to some bargain-hunting by retail investors.

Traders were also talking about a possible takeover bid for the oil services group Hunting, sending the shares 6p better to 511p. The company reported a doubling of first-half profits in August, and some investors believe that the industry is due for a bout of consolidation.

In the small caps, Accys Technology raised €9.8m via a placing through the broker Collins Stewart with institutions at €1.48. The company, which owns patents on technology that can give softwood hardwood properties, will use the proceeds to further develop its technology. Full-scale commercial production is expected to begin before the end of the year according to some traders. The shares closed €0.03 better at €1.53.

Armour Group, the developer and installer of home and car entertainment systems, calmed nervous investors with an encouraging outlook statement on top of results that were in-line with market forecasts. The chairman, Bob Morton, said that current trading is "ahead of expectations" as the shares rallied 4p to close at 39.5p.

Traders will be looking out for an announcement from Transense Technologies today. The tyre giant Michelin is rumoured to be on the verge of confirming that it will use Transense's battery-less tyre pressure monitoring system on its next generation of truck tyres. A deal with a major producer like Michelin could transform the company's fortunes. The shares closed at 86.75p yesterday, up 3.75p.

The word among small cap traders is that Oxford Biomedica, 2.5p firmer at 28.25p, is poised to report blockbuster trial results next week for its Parkinson's disease treatment. The most bullish investors believe it could even be a cure for the disease. The company is thought to have performed the trials outside the UK because of pressure from animal rights campaigners and is due to report its findings on 9 November.

Sticking with biotechnology, Proteome Sciences could be about to announce some revenue from a completely unexpected source. Three American companies are thought to have launched new products that directly infringe Proteome's patents and the company is thought to be in a strong position to claim a significant share of sales. The shares closed a penny better at 68.5p.