Market Report: Yell Group rings up gains on talk of Spanish bid

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Unglamorous though it may seem, the telephone directories industry has been a hot sector for corporate activity over the past few years, with a number of large deals being done by private-equity firms and trade buyers.

If market rumours are to be believed, Yell Group could join in the current industry consolidation, with the Spanish directories group TPI thought to be planning an audacious bid for the UK's dominant operator once Telefónica Spain's national telecoms carrier, sells its 60 per cent stake. Audacious because, with a market capitalisation of £2.2bn, TPI is less than half the size of its UK rival, which is valued at about £4.8bn including debt.

Most traders believe any bid for Yell will come with a substantial chunk of cash from private equity. Yell has been in the hands of buyout firms before, having been floated in July 2003 by Apax Partners and Hicks, Muse, Tate. With a number of public to private bids failing in recent weeks, some see the business as an easier target. Yell shares have performed well since re-listing but have not beaten the strong equity markets.

Yell was the best performer in the FTSE 100 yesterday, closing up 17.5p, or 3.3 per cent, at 541.5p.

Elsewhere in the market rumour mill, the plant-hire group Ashtead was well bid on talk of a 260p-a-share offer, with the finger once again being pointed at private-equity buyers. Its shares closed 12p better at 235p. Ashtead generates nearly 80 per cent of its profits from a fragmented US market, and traders said the most likely source of the bid chatter was buyout houses, but did not rule out a bid from a trade buyer.

There was a raft of takeover gossip among traders during yesterday's session. AB Ports, often the subject of bid speculation, added 31.5p to 731.5p on talk that an offer may come in for the group at 850p-a-share. Details on who the possible bidder may be were vague but there was, inevitably, talk of private-equity interest, with Goldman Sachs Capital Partners, the buyout arm of the Wall Street giant, the name on most lips.

Elsewhere, miners came in for a hefty bout of profit-taking after Rio Tinto said first-quarter iron-ore production at its Hamersley mine in western Australia was 9 per cent less than the corresponding period in 2005. Rio stock tanked in late trade to finish 118p worse at 3,075p. Its rivals BHP Billiton and Xstrata also traded lower, despite a bullish note on Xstrata from UBS. The heavyweight broker increased its price target on Xstrata from 2,400p to 2,500p, but the miner's shares closed 70p cheaper at 1,996p, while BHP, the world's largest integrated miner, lost 41p to 1,148.5p.

The sector was not helped by talk that Comex, the New York commodities exchange, raised its margin rates for traders prompting a panic sell off. Weakness in commodities sent the FTSE 100 8.4 points lower to 6,081.4 after having spent most of the session above 6,100.

Cairn Energy was the only major commodity stock to finish the day in positive territory, closing 54p firmer at 2,321p as traders warmed to the appointment of Rahul Dhir as the chief executive of its Indian operations. The group said it is looking to demerge its Indian operations with an initial public offering on the Bombay exchange either late this year or early next year. At its AGM, the group also confirmed a possibly significant oil discovery in Rajasthan.

It was a busy day in the small-cap sector for the former England cricketer Phil Edmonds, with plenty of activity in the three companies he chairs. Central African Mining continued to slide with market makers reporting significant sellers but some buying support. Its shares dropped 2p to 87p as 10.8 million shares changed hands.

Central African Gold started the day in positive territory, 2.25p better at 16.75p, before the late sell-off nudged its shares down 0.38p to 14.12p. Finally, there were rumours that White Nile may be poised to update the market on a legal case that may open up its disputed assets in the Sudan. White Nile closed 12p better at 127p.

The exploration and production minnow Faroe Petroleum was well bid on rumours that drilling in its North Sea fields will commence sooner than expected. Traders said prospects are very good for a "major discovery". Faroe shares closed 9p better at 168.5p, an all-time high.

Finally, traders will be on the lookout for UraMin, due to start trading on AIM today. The company has raised $60m, primarily through US institutional investors in a placing through the brokers Canaccord Adams and BMO Nesbitt Burns. Galahad Gold, the majority shareholder with 11 per cent of the stock, rose 7 per cent to 11.75p in anticipation of the UraMin IPO. Its shares are expected to open at $1.20.