Market Report: Traders build case for imminent Hanson bid

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The Independent Online

Rumours about a bid for Hanson, the building materials supplier, have done the rounds on and off for the best part of a year, but the story is again gathering momentum as traders bet it is only a matter of time before a predator goes public.

Hanson is in a particularly strong position in comparison with many of its rivals on both sides of the Atlantic, with enough aggregate reserves to maintain its position in the market for many years to come. Many sector watchers believe it is Hanson's reserves that make it such an attractive proposition for a suitor, and the name now linked with a bid is Lafarge, the French group and the world's number one cement producer.

Until recently, Mexican rival Cemex had been the favourite to bid for Hanson and traders were not ruling out a competitive auction. However, Cemex acquired most of Blue Circle's Central American assets after its hostile takeover by Lafarge in 2001 and a similar deal could be on the cards. Hanson surged 22.5p to 799.5p, a new all-time high.

Lehman Brothers expects a bullish round of trading statements from the property sector next month, with minutes from the recent MPC rate rise meeting also providing a boost for the sector. The broker reiterated its "overweight" stance on British Land and Hammerson, sending the shares 46p firmer to 1,612p and 35p better to 1,500p respectively.

Among the more outlandish rumours doing the rounds is vague talk that BP, 3.5p better at 548.5p, may be lining up an audacious bid for BG Group, the oil and gas production arm of what was once British Gas. The rumours do have some support though, with speculation that Lord Browne of Madingley is lining up one more valedictory deal before he leaves the company in July. One trader said: "BG Group has been mentioned as a possible bid target before, and there is no reason why BP should be ruled out as a potential suitor." BG Group added 13.5p to 676p.

Mining issues were in demand after a bullish update on the sector from Credit Suisse, urging clients to increase their exposure to the sector. The Swiss investment bank particularly likes the integrated mining majors, sending Rio Tinto 100p better to 2,760p and BHP Billiton up 26p to 965p. But talk about a bid for Vedanta Resources, the India-based copper miner, looks to be finding few supporters despite a 65p surge to 1,190p. Traders pointed to the large family stake in the business, totalling 54 per cent of the stock, as a major stumbling block to any predators.

London shares enjoyed a buoyant session with strength across all major sectors, thanks to positive broker comment and the usual round of corporate activity rumours. The FTSE 100 closed 87.2 firmer at 6,314.8.

Tuesday's trading update from WH Smith was far better than even the most bullish investors could have hoped for. Swiss investment bank UBS followed on from Merrill Lynch's positive comments by raising its price target for the shares to 430p from 400p, although it retained its "neutral" advice. WH Smith shares rallied 6p to 401p, having been as much as 19.5p firmer earlier in the session.

Debenhams was in the red again after Morgan Stanley reiterated its cautious stance on the retail sector. Rumours have been doing the rounds that lending banks are having difficulty selling Debenhams debt, and traders said there was little enthusiasm for the stock. The shares fell another 2.5p to 167.5p.

Second-line gambling stocks were in focus but for once it wasn't the online sector that got most of the interest. Morgan Stanley cut its recommendation on Ladbrokes and recommended that its clients switch into rival William Hill. The US investment bank said shares in Ladbrokes have more than recovered since November's warning and upped its target for William Hill to 700p. Ladbrokes shed 1.5p to 445.25p; William Hill climbed 4p to 660p.

Commoditrade was one of the few small-cap stocks to attract significant volume as the shares ticked 2.5p firmer to 35.25p. Speculation about a takeover has been rife for several months and investors are betting that a formal bid is very close. The company confirmed offer talks in early December and yesterday's volume, five times the average, indicated to some punters that good news is on the way.

Finally, Sovereign Oilfields made a small acquisition, paying £4.85m in cash for pressure vessel designer Forfab. Of more interest to investors was news that Merrill Lynch has extended Sovereign a £50m credit facility and taken a 3.5 per cent stake in the group. Traders took the deal as a solid endorsement of Sovereign's prospects, sending the shares 15p firmer to 212.5p.