Market Report: Traders tune in to the prospect of a bid for ITV

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The Independent Online

Now that six months have passed since Apax Partners decided against a bid for ITV, the private equity group is free to make another offer for the struggling broadcaster, and the talk in the market yesterday was that one will come sooner rather than later.

Ironically, the six-month deadline coincided with the final day of Charles Allen's tenure on the board of ITV. With Mr Allen out of the way Greg Dyke, the former BBC director-general and a leader of the failed Apax bid, is thought to be enthusiastic about taking another crack at ITV.

Performance at the broadcaster, formed two years ago by merging Carlton and Granada, has been little short of dire so far this year and the advertising market and viewer ratings are showing few signs of a turnaround. However, investors hoping for a repeat of the reported 130p per share offered by Apax in April might be disappointed.

One trader said: "Major investors could be tempted by less than the previous offer just to get out, and another successful defence looks much tougher than it was in April." ITV shares added 2p to close at 98.75p as 34 million shares changed hands.

The word in the market is that Barclays, the UK's third-largest bank, is heavily exposed to the online gambling sector, which collapsed yesterday on new legislative moves in the US. Even so, the shares rallied 8.5p to close at 682.5p, just short of a new high for the year, as most traders took the view that even if Barclays is exposed to a weak sector it is unlikely to have anything other than a marginal impact on group performance.

Further downgrades to Next and Matalan leave the broker Panmure Gordon rating every clothing retail it covers as a "sell". The broker points to the long-term weather forecast, predicting a warm winter, as well as uninspiring fashion trends. The German broker West LB cut its rating on Next from "hold" to "reduce", sending the shares 17p lower to 1,879p. Meanwhile, Matalan fell 1.25p to 185.25p with the 11 October offer deadline for founder John Hargreaves looming.

In the wider market, strength in mining stocks offset the weakness in the online gaming sector, although overall volume was poor. The FTSE 100 index closed 3 worse at 5957.8, despite a decent opening on Wall Street and the expectation that the Dow Jones will hit a record high this week on falling oil prices.

Positive comment on the UK housing and mortgage market from Northern Rock, on top of volatility in riskier sectors of the market and better than expected US housing data, helped house builders perform strongly. Barratt Developments added 34p to close at 1,100p having traded 47p better earlier in the session. Bovis Homes added 29p to 955.5p, an all-time high, and Redrow closed 16p better at 604.5p, although for once there was little in the way of renewed bid rumour.

Investor enthusiasm for Carphone Warehouse continued after last week's deal with US retailer Best Buy. The shares climbed another 14.75p to close at 322p, still some way short of the 360.75p the shares peaked at in March.

Investors are still dumping shares in the microchip group CSR after last week's disappointing earnings guidance and broker downgrades. The shares have now fallen more than 45 per cent from the high and closed yesterday at 814p, down 29p, a new low for the year. The broker Goldman Sachs still has a target of 1,300p for the shares, almost 60 per cent higher than yesterday's close, and many brokers believe that the shares now look oversold.

There is likely to be a bigger queue than usual at Gamblers Anonymous meetings this week - joining the regulars will be a mob of investors nursing heavy losses after the sector went into freefall. Small cap stocks suffered disproportionately to the larger sector players as investors willingly accepted any price to get out.

World Gaming tanked 48.25p to 15.25p as it confirmed that talks with Sportingbet are off, while Leisure & Gaming fell 28.75p to close at 9.75p. Associated non-gaming stocks NETeller, a payment systems provider, and Playtech, a software provider, did not escape the carnage, falling 215p to 140p and 103.25p to 145.75p respectively.

Finally, there was an encouraging first day of dealings for SSP Holdings, an insurance industry software provider, after a placing at 98p by the broker KBC Peel Hunt. The shares closed at 105.5p, valuing the company at just over £75m, giving investors a 7.7 per cent premium as the company raised £31m of new funds.

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