Speculation swept the market yesterday afternoon that Deutsche Telekom is poised to launch an audacious bid for BT Group, which will have to value the former monopoly at more than £31.1bn, its current value including debt. The private-equity giant, Blackstone Group, has recently taken a strategic 4.5 per cent stake in Deutsche Telekom and is seeking a seat on the board. Traders said Blackstone would buy the parts of BT Group that Deutsche Telekom does not want and would have to sell to ease regulatory concerns
Traders said the bidding for BT would have to start at a minimum of 250p, although they hinted that if the BT board accepts an offer it might need to be closer to 300p per share. Shares in BT Group edged 3.25p better to 226.75p as more than 47 million shares changed hands.
London equities performed strongly, with the FTSE 100 closing 83 better at 5,670, and as most European markets were closed for national holidays, London took its lead from a strong performance on Wall Street on Wednesday.
Elsewhere in the FTSE 100 there was good support for BG Group, 32.5p better at 699.5p, Corus Group, 15.25p firmer at 373p after a week of heavy falls, and Man Group, 90p better at 2,285p, as investors ignored weak performance from its flagship futures fund in May.
A bullish 162-page magnum opus on the housebuilding sector from the heavyweight broker Citigroup appeared to be well timed. The US investment bank highlighted the strong start to the year for housebuilders and said: "The recent slump in share prices is completely overdone and ignores the medium-term fundamentals." The bank upped its recommendation to "buy" on Persimmon, up 19p to 1,198p, Bovis Homes, 13p higher at 809p, Barratt Developments, up 16p to 906.5p and Redrow, 7p better at 461p.
The biggest faller in the second-line stocks was London Stock Exchange, a day after the company reported its best financial year. Investors believe Nasdaq is unlikely to launch a full bid now that a link-up between the New York Stock Exchange and Euronext looks certain. The shares fell 110p to 1,079p.
Invesnsys did not surprise many traders by announcing a rights issue, but early sellers were given a shock as the shares attracted buying support, ending 1.75p better at 21.5p, on good volume of 192.5 million shares. The industrial controls group will raise up to £341m by selling 2.276 billion new shares at 15p each, and intends to repay 35 per cent of its high yield debt with the proceeds.
The soft drink maker Britvic disappointed investors with its second profits warning since floating in December. Institutional investors were thought to be fuming after the company again blamed falling sales in fizzy, high-sugar content drinks for lowering guidance again. However, the stock attracted strong buying support after hitting a low of 170p, down 34.5p, and closed at 222p, a rise of 17.75p, as traders speculated that a private-equity buyer may be preparing a bid. After the start Britvic has made as a quoted company, many investors would be delighted if an offer was made.
Last year's top performing stock on the London market, the online auction group QXL Ricardo, pleased traders by announcing a 59 per cent rise in sales and pre-tax profits of a little more than £2m, up from a £1.5m loss in 2005. The shares rose by a staggering 1,622 per cent last year to hit a high of 15,800p after recovering disputed assets in Poland. A strong outlook statement for the rest of 2006 helped the shares add 1,359p to close at 11.934p.
Equator Exploration had another bad day after rumours of a distressed hedge-fund seller sent the shares substantially lower on Wednesday. Selling pressure continued in the morning, with the shares trading as low as 86p, a fall of 54p, before a flood of buyers pushed up the stock to 148p, an 8p gain. However, buyers at the lower levels were quick to lock into profits, once again sending the stock down to 116p, a fall of 24p.
Leading the small-cap fallers was Ramco Energy, 9.25p worse at 13.5p, a fall of 40.7 per cent. The company warned that litigants in ongoing court cases in Texas and Scotland may force it to cease trading or appoint administrators. Investors in the hydrocarbon exploration group deserted the stock in droves as market makers called the stock lower to discourage more selling.