Market Report: Talk of fresh Texas Pacific bid lifts British Vita

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The Independent Online

Those Traders who bet on takeover situations piled into British Vita, up 5.5p to 343p yesterday, convinced that the private equity giant Texas Pacific will soon return with a fresh bid for the foams specialist. They reckon the new offer could value that group at up to 400p a share.

Those Traders who bet on takeover situations piled into British Vita, up 5.5p to 343p yesterday, convinced that the private equity giant Texas Pacific will soon return with a fresh bid for the foams specialist. They reckon the new offer could value that group at up to 400p a share.

On Monday, British Vita unveiled its defence against Texas Pacific via a £185m share buy-back programme. But traders take the view this will not be sufficient to hold off the attack from the US buyout giant, which certainly has the firepower for such a deal and is said to be determined to complete the purchase.

Texas Pacific is believed to have invested a lot of time on the deal. Prior to its original 335p a share offer, it is said to have spent months on researching British Vita, even going as far as to send a team of employees to count the lorries going in and out of the company's factories, with the aim of getting as complete a picture as possible of the business.

As for the rumoured takeout price of 400p, analysts believe it is by no means too dear for Texas. Even at this level, the buyout firm should have little troubled raising the debt finance required for a cash offer given British Vita's robust cash flows. The Takeover Panel has given Texas Pacific until March 21 to table a new offer for the group.

In the FTSE 100, down 14.8 points to 4,996.1, Man Group shone, gaining 55p to 1,470p, thanks to yet another week of positive gains for its flagship AHL fund. The hedge fund group announced that the net asset value of the fund, which accounts for about 13 per cent of Man's profits, had risen by 1.47 per cent on the week. Cable & Wireless jumped 1.25p to 132.75p as word spread that the telecoms group plans to slash 480 jobs in the UK. The move should generate annual cost savings of £26m and comes on top of the 600 redundancies C&W unveiled along with its interim results in November.

Lastminute.com rose 6.25p to 110.25p as bid rumours circled the online travel group. Dealers also reported bullish comments about the company coming from the heavyweight broker Cazenove. Northumbrian Water ticked 1p higher to 168.5p after John Cuthbert, its managing director, bought 20,000 shares at 171p. Christopher Green, the utilities finance director, picked up a more modest 15,000 at 168.5p.

Acambis dropped 8.5p to 259.5p after Merrill Lynch expressed worries about future sales at the biotech and cut back its rating on the stock to "neutral" from "buy". The move follows Tuesday's news that Acambis had delayed the regulatory filing for its yellow fever vaccine, Arilvax, indefinitely due to manufacturing problems at its plant in Liverpool.

Short sellers moved in on Luminar, down 10.5p to 509.5p, in advance of a trading statement from the late bars group on Wednesday. Bears of Luminar reckon the statement will disappoint and their belief was reinforced by a note from Bridgewell Securities. The broker said warned that sales during February were likely to have deteriorated at Luminar and warned of "increasing negative sentiment around the stock". Bridgewell also pointed out that the month just gone is traditionally a quiet one for the nightclub industry and that the recent cold weather in the UK will have made trading conditions even more problematic for Luminar.

Eidos lost nearly one-third of its stock market value, falling 18p to 40.5p, on rumours that a profits warning is imminent from the computer games developer. Over the past 12 months Eidos has had one disaster after another and, despite putting itself up for sale last year, has struggled to find a suitor. Yet another profits warning from the group is likely to deterprospective buyers. Some market players fear would-be suitors could be put off from bidding for good, or alternatively, may be able to swallow the company at a very low price.

Finally, Homestyle slid 7.75p to 100.5p amid renewed worries about the retailer's £70m debt burden. News that Barclays Bank has exercised warrants it was given back in August at 25p highlighted to investors that banks need significant incentives if they are to lend to Homestyle. Richard Ratner, an analyst at Seymour Pierce said: "These warrants tend to be issue as part of the lending fee for companies which are in the intensive care department of the bank."

Homestyle has promised it will soon sell its Benson's Beds division and that the cash from this will wipe out its debt burden. Numis Securities believes the company is making a mistake with this strategy, claiming it would be better off attempting to shore up its balance sheet via a rights issue. This would allow it to keep hold of the highly cash generative Benson's business.

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