Market Report: Traders take a punt on HHG takeover talk

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The Independent Online

The fund manager HHG was flavour of the day among City traders yesterday as many bet that the group will soon be involved in the ongoing consolidation of the industry. Bulls of the stock reckon the group is ripe to be taken over after selling off its life assurance business for £1bn in December.

The fund manager HHG was flavour of the day among City traders yesterday as many bet that the group will soon be involved in the ongoing consolidation of the industry. Bulls of the stock reckon the group is ripe to be taken over after selling off its life assurance business for £1bn in December.

But who would have the fire-power to buy HHG? The owner of Henderson Global Investors is presently valued at £1.5bn, so any predator will have to be among the industry's larger players such as Schroders or Amvescap. But traders on the whole were uninterested in such details as they piled into HHG stock, sending it 0.25p higher to 59p on volume of 46 million. At one point in the day the stock traded up at 62.25p.

Consolidation among fund managers is set to be a major theme in 2005. Last year, F&C merged with ISIS Asset Management, Barclays snapped up Gerrard, the wealth management specialist, while just this month a bid battle broke out for Rensburg.

Among blue chips, Corus jumped 1.25p to 53.25p as its rival ThyssenKrupp posted forecast-busting quarterly results and raised its full year profit estimates. The German group said that earnings before tax in the three months to December had grown to over ¤400m, well ahead of the ¤360m analysts were expecting.

Ekkehard Schulz, Thyssen's chief executive, told a shareholders' meeting that the boom in steel prices is set to continue this year.

Hilton gained 3p to 304p as hotel industry data indicated that operators in London had enjoyed a very strong December. Revenue per room rose 9 per cent during the month, prompting ABN Amro to reiterate its "buy" stance on Hilton. Reuters ticked 2.5p better to 390.75p on speculation that its Instinet electronic brokerage may soon be acquired by its rival Archipelago. Reuters owns 62 per cent of the business and if such a deal were to take place the group would enjoy a £1bn windfall. Analysts were excited by the rumour and suggested that Reuters could use surplus cash to increase its share buyback programme.

Marks & Spencer dropped 2.75p to 353p as Philip Green was reported to have denied speculation that he plans to buy Brandes' 9.2 per cent in the retailer. Dresdner Kleinwort Wasserstein downgraded M&S to "hold" from "add" and urged its clients to switch into Next, up 6p to 1,620p. "Green can now bid again if he wants, but we suspect he will wait to see if M&S flounders again in 2005 before considering a new bid," said the broker.

Dresdner takes the view that if Mr Green does attempt a fresh move on the company he will go directly to shareholders, but it warns investors not to assume that he will bid 400p a share again given the weakness of the retail market. As for Next, the broker described the retailer as having "very solid fundamentals" when compared to M&S.

The FTSE 100 index had a lacklustre end to the week, closing just 2.5 points better at 4,803.3. The FTSE 250 ticked 0.7 points lower to 7,090.6.

Stanley Leisure added 4.5p to 410p as the Malaysian conglomerate Genting Berhad raised its stake in the group to 10.9 per cent. On Thursday, Genting added to its holding in London Clubs, which now stands at 21 per cent, and there is a growing belief in the City that it may be planning to engineer a merger of the two.

A combination of London Clubs and Stanley Leisure certainly makes sense. Not so long ago, Stanley Leisure attempted to acquire London Clubs but was rebuffed by its board. Although there is no guarantee that Genting will attempt such a coup, it definitely has the firepower to continue to add to its holding in both companies. At the end of last year it raised $350m of cash for no explicit reason.

The insurer Alea Holdings had another bad day, falling 5p to 180.5p, after Merrill Lynch downgraded the stock to "sell". On Thursday, Alea shares were hit hard following a profit warning from the group. Ted Baker lost 1p to 507.5p as its chief executive, Ray Kelvin, sold 250,000 shares at 505p. Even after the sale, which netted Mr Kelvin £1.2m, he retains 17 million shares, or 40.3 per cent of the fashion retailer.

Lower down the pecking order, Speedy Hire continued with its upward march, gaining 11p to 595p, on talk the tool hire specialist plans to expand the number of its depots. Waterman, the engineering consultancy, ticked 2p better to 96.5p on hopes it is close to securing a major contract in Liverpool.

Cape rose 1.5p to 161.5p after declaring that it continues to experience strong growth across all its businesses and that its full year results would beat expectations. Meanwhile, director share-buying pushed Ridge Mining 0.5p higher to 46.5p.

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