Market Report: Vodafone rings up a gain on talk of asset sales

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The Independent Online

An offer from Verizon could return about $50bn (£26.9bn) to Vodafone, but as the stake has a book value of almost nothing the company would face a huge capital gains tax bill if it sold. Traders said Verizon could sweeten the deal by throwing in its 20 per cent stake in Vodafone Italia for nothing, offsetting at least part of Vodafone's US tax liability.

One trader said: "There are an enormous number of options for Vodafone but one certainty is that the restructuring of the group is far from over. For that reason alone it is not a stock to be short of at the moment." The broker Citigroup reiterated its "buy" recommendation on Vodafone ahead of publication later this month of the results of a top-to-tail strategic review. The shares added 2.5p to close at 128p.

The retailer Marks & Spencer was also strong yesterday as news filtered through to traders about a big bet in the options market. One punter bought 6,000 contracts for the June 650p calls, a substantial trade that could be worthless in six weeks' time if the price does not go above that level. Shares in M&S rallied 20p to close at 620p, an eight-year high.

London shares enjoyed a strong end to the shortened trading week, as the FTSE 100 closed 54.8 better at 6,091.7. Once again commodities issues provided the bulk of the upside, with Xstrata enjoying its second successive session of triple-digit gains to close 107p to 2254 103p better at 2,250p.

Another old story doing the rounds again yesterday was talk that the German engineering and electronics giant Siemens may be lining up a bid for struggling UK group Invensys. Some traders may believe the story, but for others it is a very long shot. One said: "Invensys has been a bit of a poisoned chalice over the last few years and I see little reason for Siemens to risk taking on a business that has had such a difficult recent history." Invensys firmed 1p to close at 24.5p.

Leading the second line fallers once again was iSoft, the troubled software group that has already warned on profits twice this year. The broker ABN Amro became the latest to downgrade its forecasts for the company, reducing its stance to "sell" and setting a new price target of 90p. The stock closed 10.5p worse at 100.25p, a fall of 9.5 per cent as traders speculated that the company is lining up a deeply discounted rights issue.

Corporate activity in the pubs and bars sector continued, despite the rejection of Robert Tchenguiz's 550p per share offer for Mitchells & Butlers. Suffolk-based landlord and brewer Greene King topped the FTSE 250 leaderboard, adding 74.5p to 826.5p on speculation that it would be the next to face a takeover offer, possibly from a private equity bidder. Meanwhile, M&B remained unloved as traders continued to take profits, closing 16.5p worse at 477.5p. Enterprise Inns was also well bid, adding 36p to 981.5p.

The communications infrastructure group Filtronic was among the leading gainers in the small-cap index after confirming that it is in negotiations to sell its Wireless Infrastructure operations to US group Powerwave Technologies. The unit is widely seen as the best part of the Filtronic and bullish traders said that it could attract bids of up to £230m if opened up for auction. The shares leapt 16.7 per cent to 206.5p, 29.5p firmer, giving Filtronic a market capitalisation of just £150m.

It has been a busy couple of days for the broker Hichens, Harrison & Co. Yesterday the company brought alternative fuel investment vehicle Biofutures International to Aim after a placing at 10p. There was substantial interest in the stock as 2.7 million shares changed hands, driving the stock to a significant premium. Market makers expect strong newsflow from the group as the shares closed at 28.5p, a 185 per cent premium to the placing price.

On Monday, Hichens brings to the market Horizonte Minerals, a mining exploration company with assets in Brazil and Peru. Hichens has been responsible for a number of highly successful natural resources offerings, including Aim Resources, Platinum Australia and South China Resources. Horizonte, which is raising £2m of new capital, is to be placed at 30p giving the company an initial capitalisation of £9m.

Finally, the Midas touch does not seem to have deserted Phil Edmonds just yet. Central African Mines, which he chairs, raised another £100m via a placing of 125 million shares with blue-chip investors at 80p. The shares closed 4.25p firmer at 96.5p, giving the company a value of almost £1bn, less than 3 years since a market debut at 3.25p.

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