Market Report: Talk of Swiss interest in Cairn lifts oil stocks

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The Independent Online

Oil-related companies were looking slick yesterday as takeover chat swamped the market. The industry has almost singlehandedly kept the rumour mill turning recently, and yesterday there was talk that the exploration and production group Cairn Energy was back in focus.

The latest to be linked as a potential suitor was the Swiss petroleum refiner and wholesaler Petroplus. Shares in Cairn rose 24p before retreating in the afternoon to close down 13p at 2,635p. One trader said: "Cairn is definitely being looked at; I'm just not sure if Petroplus would be at the top of the list."

In the oil services sector, news finally emerged in one stock that has been heavily trailed in this column: Abbot Group. The talk of an imminent bid had intensified recently, and yesterday the group recommended a 390p-per-share offer from the private equity house First Reserve Corporation. It closed up 13.62 per cent to 379.5p.

A strong riser on the top tier was Rexam, 2.33 per cent higher to 396p at the close. It proved welcome shelter from the storm unleashed by a profits warning from the packaging group last week. It rose on support from Credit Suisse, which upgraded the stock to "outperform" after the recent sell-off.

The FTSE 100 remained tentative for the second day in a row. The market just about kept its head above water, and closed up 5.2 points at 6,284.5, on weak volumes.

Top of the main market was the beleaguered lender Northern Rock, 4.65 per cent stronger at 90p. Although Bradford & Bingley quickly shot down reports it was to wade into the takeover battle, the Rock rolled at it revealed hedge fund SRM Global Master Fund had boosted its stake to 9.7 per cent from 9.1 per cent.

The rest of the banking sector suffered, led down by Barclays. The UK bank finished 1.96 per cent lower at 499p as Goldman Sachs cut its recommendation to "sell" over widening credit concerns.

Bearish brokers caused a fair bit of the bloodletting among the blue chips, with Kingfisher diving to the bottom. First UBS slashed its ratings on general retailers, cutting Kingfisher's target price to 160p from 190p, before Standard & Poor's said it had lowered the outlook on the stock to negative. It fell 2.98 per cent to 143.1p.

Sellers also slapped down Intercontinental Hotels, 2.23 per cent lower to 877p after a Morgan Stanley downgrade. The broker cut its rating to "equal weight" over growth fears at the US business.

The soaraway riser on the mid tier was Sports Direct International, which was a surprise, given it had reported results described by one analyst as "terrible". The retailer unveiled a 35.2 per cent fall in first-half pre-tax profits, after an "exceptionally challenging trading environment for the UK sports retail sector", but added it was confident it could meet full-year expectations. This sent the shares up almost 20 per cent to 101p. Panmure Gordon said: "The management confidence on Ebitda may be enough to stabilise the share price."

Another stock to have suffered since floating this year is It was looking on the money yesterday as it rose 6.91 per cent to 139.25p after a well received trading update.

A knockout private equity bid lifted Biffa 6.53 per cent to 338.5p. The waste management group, constantly linked with takeover approaches this year, announced it had received a revised 1.2bn offer from Montagu Private Equity and Hg Pooled Management.

At the other end, industrial engineer IMI spiralled as it admitted that an investigation into its Severe Service business "will disrupt revenue growth prospects for 2008". The shares tumbled 6.57 per cent on the news to 387.25p, despite the prediction of in-line results this year. Investec analyst Chris Dyett said: "Severe Service has been the main driver of growth over the last few years."

Small-cap investors breathed a sigh of relief as the green energy group Tersus Energy secured the 500,000 financing needed to "implement our strategy". The loan was made by 18.4 per cent shareholder Peter Gyllenhammar through his Bronstadet vehicle, sending the shares up 85.71 per cent to 3.25p.

Shares in Torotrak were motoring after the automotive transmission systems maker signed a 7m deal with an unnamed European truck and bus group. The contract sent the stock almost a third higher to 28p.

The asset manager Impax Group leapt 11.54 per cent to 36.25p after BNP Paribas Investment Partners bought a 28.3 per cent stake.

On the downside, Inspired Gaming Group plummeted after FL Group signalled "game over" on its potential takeover bid. It fell 50p in the morning as FL blamed the state of the credit markets for its decision, but rallied to close 28p down at 234p.