Market Report: VT Group sails higher on new wave of bid talk

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Rumours re-emerged yesterday of a potential takeover approach for VT Group, sending the shipbuilding and defence contractor up 35p to 616p. There were no names linked to the possible bid.

One year ago, speculation was rife that BAE Systems had approached the group over a tie-up. This came after the pair had held talks over teaming up to target the rival Babcock International Group. BAE and VT signed a joint venture to produce surface warships in July.

The market stormed higher yesterday, following Tuesday's losses, led up by Scottish & Newcastle. Traders were raising a glass as the rumours of a bid, as old as the hills, were finally confirmed. The stock soared 18 per cent to 756p as Carlsberg and Heineken announced they were preparing a joint bid. The inevitable counter-bid rumours did the rounds in the afternoon with SABMiller reportedly preparing to wade in. It closed 33p higher at 1462p.

The news helped the FTSE 100 shake off its lethargy in the morning to close 63.4 higher at 6,677.7.

The market continued its support for Imperial Tobacco this week on talk it is to sell Altadis's logistics division when it completes the ¿12bn (£8.36bn) acquisition of its Franco-Spanish rival. Positive results from Philip Morris-owner Altria in the US also helped boost the stock 4.31 per cent to 2,397p.

The housebuilder Barratt Developments has endured a torrid eight months, spiralling from 1,282p in February to 672p on Monday. It rose 18p to 694p yesterday after ABN Amro upped its rating from "hold" to "sell". It was further bolstered after share buying from its chief executive and the financial director.

The mining major Rio Tinto endured losses after the market reacted badly to its third quarter trading update. It fell 3.15 per cent in the morning, and, despite rallying, closed 1.47 per cent lower at 4,354p, dragging the sector down with it.

Oil companies also retreated, as investors took profits following the booming oil prices earlier in the week. BG Group was the lowest, down 0.33 per cent to 911p. Traders speculated that the shine had come off BP after prospective suitor Shell was rumoured to have turned its attention to Evergreen Solar in the US.

On the second tier, there was chat that Lord Harris of Peckham was preparing to lift his bid for Carpetright in an attempt to appease hedge fund shareholders. Traders heard chairman and chief executive Harris was preparing to up his bid from 1,250p per share to 1,275p. It hopes the move might cause Harris Associates (no relation), which has an 8 per cent stake, to drop its opposition to the offer. Other traders said the rise was too small to reverse the hedge fund's position.

Top of the second tier was Sports Direct International on talk that Mike Ashley has had enough of what he called "cry-baby investors". The stock soared 10.99 per cent to 156.5p as rumours of extensive share buying did the rounds. Traders were speculating Ashley wants to take the company private after less than a year on the market.

The packaging manufacturer DS Smith also rose, up 7.87 per cent to 216p, following a first-half trading update. It anticipates pre-exceptional pre-tax profits of over £50m, up from £29m last year, and added its confidence "that the group will make substantial progress this year".

After confirming two bids from Carillion on Tuesday, McAlpine was up 12.5p in anticipation of a third. Dresdner Kleinwort said, should a bid above 550p be lodged, investors should "take the money and run". The shares weakened to close 0.5p up at 538.5p.

Second-tier miners also suffered, with Hochschild Mining among the worst performers in the morning. The profit-taking came as it revealed a strong third-quarter update, although the stock rallied from 20p down to 2p off at 421p. Segro was the lowest on the FTSE 250 after its price target was cut by Goldman Sachs.

Down in the basement, LSL Property was among the worst small-cap performers after a profit warning sent it down 16.47 per cent at 142p. The internet telephone group Citel was also down after revealing it would miss forecasts for the full year. It fell 22.5p to 14.5p.

Top of the AIM risers was Qonnectis, the energy and water conservation technology group, after an order worth £198,000 was placed by Thames Water. The stock rose 68.3 per cent to 1.7p. Feedback was also up after it confirmed it was in discussions with an unnamed suitor over a potential takeover bid. The electronics group rose 34.8 per cent on the news to 3.87p.

Investors also piled into GW Pharmaceuticals. The stock rose 16.5 per cent to 60.25p after a clinical journal said its Sativex product was effective for certain treatments related to multiple sclerosis.

Adventis Group is expected to see strong trading today with talk that the multimedia marketing group is set to announce a raft of recent account wins.

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