Traders' drink merger hopes fuel Christmas cheer for FTSE

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The Independent Online

In the absence of any major corporate or economic news, traders were left to gossip about which companies they believe are most likely to be bid for in 2004. One can't blame them. Christmas Eve is pretty much the quietest day of the year in the Square Mile, not helped by the fact that the market is open for just half a day.

In the absence of any major corporate or economic news, traders were left to gossip about which companies they believe are most likely to be bid for in 2004. One can't blame them. Christmas Eve is pretty much the quietest day of the year in the Square Mile, not helped by the fact that the market is open for just half a day.

So which companies are least likely to make it through to the end of next year as independent entities? At the top of traders' lists is BG Group, 0.5p lower at 286p. It has long been whispered that Shell is mulling a bid for the oil and gas explorer. Shell certainly has the firepower for such a deal. It is nearly four times the size of BG and by now will have certainly finished digesting its 2002 acquisition of Enterprise Oil.

Other FTSE 100 takeover favourites are the insurer Legal & General, down 0.25p to 97.5p, and banking minnow Bradford & Bingley, up 0.75p to 303p. The problem that B&B faces is that it is simply too small to compete with the likes of Barclays and Lloyds. And given that the bid protection B&B enjoyed after its conversion from building society to bank has recently expired, a move on the group from a rival could soon materialise.

In the drinks sector, last year saw a significant amount of takeover speculation surround Allied Domecq, and this looks set to continue into 2004. The most probable suitors for the group are the privately owned Bacardi or Brown-Forman, the maker of Jack Daniels whiskey. A link-up of either with Allied would produce valuable cost savings in what is a very mature industry. Allied Domecq finished as one of the best blue chip performers on Wednesday, rising 6.25p to 423.75p.

Meanwhile, the FTSE 100 ended higher for the sixth straight session, rising 3.8 points to a year high of 4,444.7. The FTSE 250 rose 4.3 points to 5,753.9. BT Group lost 1.5p to 186.5p as the telecom carrier went ex-dividend. Hedge funds are thought to have a made a tidy sum from the group's dividend payment via a complex dividend wash scheme aimed at taking advantage of different tax rates on payouts to shareholders within the EU.

Galen Holdings dropped 21p to 720p as investors responded to the news after Tuesday's close that American competition authorities have begun an investigation into the complex deal between the Northern Ireland drug maker and Bar Laboratories. The deal would have seen Bar buy the rights to Galen's Loestrin drug in the US and Canada. The transaction, intended for completion in January, could well end up being delayed.

Directors at the newly floated HHG, up 2.25p at 40.5p, clamoured to buy into the stock. HHG was demerged from AMP, Australia's biggest life insurance company, and made its debut in London on Tuesday. In total, four directors bought a total of 550,000 shares at 37p.

There was another day of brisk trading in Innovation Group, down 0.75p at`` 26.75p. The insurance software provider has certainly been a popular choice over the past month as Robert Bonnier, the former Scoot.com boss, and GAM London, the fund manager, have built substantial stakes.

Mr Bonnier is fresh from the success of his investment in Regus, the office space group, which has been one of the market's best performers over the past year. At the last count ICE SAS, Mr Bonnier's investment vehicle, held a 13 per cent stake in Innovation Group. Mr Bonnier is widely tipped to add to his position in the coming days.

Although some have talked of a bid for Innovation from the former Scoot boss, it is believed he views the company as greatly undervalued and a good long-term bet.

Protherics rose 3p to 53.25p on news that BSE has been found in cattle in the US. Protherics would certainly benefit from the outbreak of the disease in America as it receives healthy royalties from the sale of BSE kits.

Elsewhere in the biotech sector, Pharmagene jumped 4.5p to 76.5p after announcing that the US drugs giant Bristol-Myers Squibb has signed up to use the company's Phase Zero and TargetEvaluator compound validation technologies for a three-year period.

Analysts believe the latest news from Pharmagene, coupled with an earlier deal with Bayer, significantly increases the likelihood that the group's service division will move into profitability.

Willmington, the publisher, was steady at 100.5p despite unveiling the acquisition of Agence de Presse Medicale, a Paris-based real-time provider of health news and information. Willmington bought the business from Reuters for £5.3m in cash. Meanwhile, Cluff Mining, unchanged at 91.5p, said it had secured a $5.7m loan facility.

Norish was unchanged at 52.5p despite the purchase of 214,000 shares by Ted O'Neill, the chairman of the food storage specialist.

Desire Petroleum slumped 1.25p to 11.25p as the Falklands oil explorer unveiled plans to raise £7.3m via a placing and open offer of new shares at 10p. Desire said it would use the cash to develop certain areas in the North Falkland Basin of the Falkland Islands. The company believes there are recoverable reserves of up to one billion barrels of oil in the area. Desire hopes to be in a position to start drilling some time next year.

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