Market Report: Traders bank on takeover talk as holidays loom

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The Independent Online

It has been a while, relatively at least, since takeover activity chat in the banking sector did the rounds, but with summer holidays approaching and many senior executives planning a break rather than bids, traders cranked up the rumour mill yesterday to try to drum up buying interest.

First was Standard Chartered, the Anglo-Asian banking group, as the broker Morgan Stanley crossed 9 million shares at 1,250p. The move sparked chat that Standard's largest shareholder, the Singaporean government fund Temasek Holdings, is poised to launch a bid for the group. The shares rallied 17p to close at 1,283p, although some traders remain sceptical about the possibility of a bid. Volume was good, with more than 24 million shares changing hands.

Elsewhere in the banking sector, a change of house broker for Lloyds TSB got tongues wagging, as rumours circulated that the appointment of Lehman Brothers meant the bank was putting itself up for sale. The real reason appears to have been Citigroup's poaching of several key banking sector staff from ABN Amro, formerly the joint broker to Lloyds TSB. Even so, most traders believe Lloyds is very much in the frame for a takeover bid, and the shares rallied 12p to 523p, again on decent volume of 61.6 million shares.

The mortgage bank Alliance & Leicester was unable to follow the rest of the banking sector and closed 17p worse at 1,193p. Traders said there has been a big buyer in the market this week, forcing the price higher, but that the order has now been filled and the stock suffered a bout of profit-taking.

Strength across the banking, retail and pharmaceutical sectors offset weakness in oil and mining, and helped the market move into positive territory after a shaky start to the week. The FTSE 100 closed 36.5 better at 5706.3.

As expected, Dresdner Kleinwort Wasserstein sold a big chunk of stock in the online gambling group PartyGaming, although the placing wasn't exactly greeted like a punter hitting the jackpot. After initially trying to place 350 million shares at 120p, the sellers, former directors Anurag Dikshit and Vikrant Bhargava, had to settle for getting rid of 200 million at 115p, as the shares closed 4.5p lower at 117.75p. As news of the less-than-enthusiastic reaction to the placing spread, its rival 888 Holdings also fell, closing 7.5p worse at 200.5p.

Ashtead, the plant hire group that has been one of the top performing stocks in the FTSE 350 over the last three years, was called 15p lower to 175.75p as Morgan Stanley placed 28 million shares at 175p. The stake is thought to belong to Dutch insurer Aegon, although traders said the sale was down to a profit-taking by Aegon rather than because of any change in view on Ashtead. Shares in Ashtead have risen from below 5p to over 200p since March 2003, when accounting irregularities at its US subsidiary threatened the company's existence.

Vedanta Resources, the Indian copper miner, marked its promotion to the FTSE 100 by falling another 4.7 per cent, on top of Tuesday's 8.9 per cent drop. A dip in the copper price was blamed for the fall, as the shares closed down 60p at 1,225p. Lonmin, the other new member of the FTSE 100's mining club, fared slightly better but was unable to end in the black, closing 5p weaker at 2,408p.

The Swiss pharmaceuticals giant Novartis shocked many traders when it revealed its offer for biotechnology group NeuTec Pharma. The two companies have agreed to a deal valuing shares in NeuTec - which is developing a treatment for "superbugs" as well as a life-threatening strain of thrush - at £305m, or 1,050p per share, more than double the price the shares were trading at before the bid became public. A mixture of short covering and hopes of a counter offer for the company sent the shares over the bid price to close at 1,080p, a rise of 155p.

A bit of follow-through buying propped up Ramco Energy and Telecom Plus, both of which gave the market some good news on Tuesday. Ramco looks to have put concerns over its future behind it, at least for the time being, after winning a Texas court of appeal case against a group of litigants which threatened to force the company to stop trading. Telecom Plus seems to be back on track after three years of problems and should move back into profitability in 2007. Shares in Ramco added another 3.75p to 32.25p, while Telecom Plus climbed 8p to 124p.

Interest in football is reaching fever pitch, which perhaps explains the jump in Watford Leisure. Shares in the group, owner of the eponymous football club, climbed 4.5p to 33p. Meanwhile, shares in Sheffield United, also promoted from the Championship to the Premier League, continued to perform more like Conference strugglers, being relegated half a penny to 13.5p.