Market Report: Talk of Experian demerger sends GUS higher

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Suggestions by a leading broker that 2006 is likely to witness further corporate action at GUS sent investors rushing to get their hands on shares of the retail conglomerate. Its shares finished 34.5p higher to 970.5p.

Next week GUS will demerge its 66 per cent stake in Burberry, which will leave the group dominated by its credit-checking business Experian. However, Deutsche Bank does not expect this status quo to make it to the end of next year. "We continue to believe that Experian is worth at least 20 times earnings, and that a separation in 2006 will crystallise that value," the broker said. The division will account for 58 per cent of GUS earnings, with the Argos retail business making up the rest.

In terms of a timetable, Deutsche suggested that a deal could come some time in the middle of 2006 and argued that this news will send GUS shares soaring. The broker said: "If Argos comes through Christmas intact there may be nothing to hold back a separation of Experian from Argos by mid-2006. Any confirmation of this will see the shares up very quickly in our view."

It argued that a US IPO of Experian is a distinct possibility. There has been strong demand for Experian peers across the Atlantic in recent months, with most enjoying a re-rating of their stock-market valuations. On this basis, Deutsche urged its clients to buy into GUS now and set a 1,140p price target on the stock.

WPP also featured as a top blue-chip performer. Shares in the media group rose 23.5p to 616p after UBS raised its price target on the stock to 700p from 640p and reiterated its "buy" stance. It is convinced WPP will easily outperform its rivals, and argued that the discount at which its shares trade relative to the wider sector is not justified.

The Swiss broker is particularly excited about the group's presence in emerging markets. WPP has the greatest exposure to emerging countries of any European media player, boasting a solid base in Asia and No 1 status in China. On the issue of industry trends in the year ahead, UBS says 2006 is likely to be a good year for the media sector, with revenues almost certain to be boosted by extra marketing activity by corporates during the World Cup.

BP dropped 11p to 640p after Goldman Sachs and Citigroup sold 185 million shares at 645p through an accelerated book-building on behalf of the Kuwait Investment Office (KIO). The deal raised £1.2bn for the KIO, an agency of the Government of the State of Kuwait, which will retain a holding of 2.56 per cent. Elsewhere in the sector, BG Group lost 0.5p to 550p while Royal Dutch Shell fell 29p to 1,886p. The FTSE 100 dropped 13.7 points to close at 5,517.4.

Regus added 2.5p to 106p in the run-up to next week's trading statement from the office space group. Vague takeover rumours surrounded the company this week but analysts were sceptical yesterday that anything would come of them. In fact, they argued that the recent strength in the company's stock has been caused by traders closing their short positions before Friday's update. Regus is one of the most heavily shorted stocks in the UK market, with about 12 per cent of its share capital held in the form of bear positions.

Should Regus releasea positive statement next week, its shares could soar as the bears run for cover. "Far from making us more cautious about our upbeat stance on Regus, [the large short in the market] makes us more interested. If Regus can avoid any disappointments next week there would seem to be a very narrow exit door for such a crowded short position," Credit Suisse First Boston said.

Among smaller companies, Getech, steady at 44p, said Peter Stephens, the chairman of the oil services group, had bought 100,000 shares at 43.5p. CSS Stellar ticked 0.5p higher to 44p as Acquisitor Holdings, the AIM-listed investment company, bought 2.2 million shares in the marketing services group, taking its total holding to 7.3 million or 25.3 per cent. Peter Gyllenhammar, the Swedish value investor, said he had bought a further 600,000 shares in Densitron Technologies, unchanged at 7.37p. The purchase takes his total stake in the company to 15.7 million or 24 per cent.

Finally, Digital Classics jumped 0.12p to 0.87p after the media sector player unveiled two acquisitions that doubled the size of the company. Digital Classics bought Box TV and NBD Holdings for a total of £9m and said the deals were the first steps towards transforming the group into a television production and distribution powerhouse. Box TV is headed by Gub Neal, previously an executive at Granada and Channel 4, and produces drama programmes. NBD sells rights to popular music programmes and events.

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