Market Report: Cadbury Schweppes bubbles on demerger talk

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Wild tales of takeover bids for Cadbury Schweppes have done the rounds on and off for the best part of 18 months, so it was perhaps not surprising that another round of bid chat had a limited impact on the shares.

That said, despite the wider market attracting plenty of profit-takers, shares in Cadbury Schweppes at least ended the session in positive territory, 4p better at 564p. The rumour now doing the rounds is that a partial break-up of the company is on the cards following a year of poor performance in comparison to the market.

Traders said the market is likely to greet a plan to demerge the chocolate side of the business with enthusiasm. One said: "Over the last few years, much more value has been achieved through demergers than mergers, and the chances of a private equity group coming in to make a bid for the whole shooting match are slim."

There will be plenty of nervous shareholders ahead of AstraZeneca's full year numbers, due next Thursday. The last six months has seen a string of disappointing developments from the group's pipeline of new drugs, although there should be little impact on current year results. JP Morgan cut its price target for the shares yesterday from 3,220p to 2,950p although it maintained its "neutral" rating as the stock closed 40p worse at 2,804p.

In the retail sector, Panmure Gordon cut its rating on Kingfisher, the home improvement retail group, to "sell" and reiterated its 195p price target. The broker believes the company's dividend has little chance of growing unless there is a material improvement in trading conditions and that there are better options in the sector. Kingfisher, which has been stuck in a tight trading range for 18 months, firmed 0.75p to 232.5p.

In the wider market, gains made early in the week have faded fast, and London shares were under selling pressure again, with the mining sector taking the brunt of the selling following two strong sessions. Rio Tinto shed 58p to 2,682p and BHP Billiton lost 23p to 936p, sending the FTSE 100 41.3 worse to 6,228 as Wall Street lost more than 40 points in the first hour of trade.

It is only four months since Kevin Lomax, the founder and chief executive of Misys, resigned after failing to take the information technology company private. Rumours were rife yesterday that another bidder is lining up an offer, sending the shares 8p firmer to 240p. However, most traders were sceptical that a bid is on the way.

Wolfson Microelectronics found plenty of sellers ahead of next week's results, closing 21.25p worse at 305.5p, thanks to a downbeat note from the US investment bank Citigroup. Although the broker retained its "neutral" rating on the stock and belief that in the longer term the shares will recover, it also believes there is a chance next week's numbers could fall short of expectations.

A bit of bid speculation is doing the rounds at Galiform, the non-retailing arm of the furniture group MFI. Although the shares shed a penny to 132.5p, traders are talking about a private equity bid valuing them at up to 160p each.

In the small caps, Accuma's grim profit warning sent individual voluntary arrangement stocks into freefall. Traders said that the warning, far from being a company-specific issue, has implications for the entire industry, particularly with reference to growing resistance from credit providers. Debt Free Direct lost 45p to 415p, shed 13p to 131p and Debtmatters tanked 47.5p to 229p. The sector looks set for another bad day on Monday after Debt Free Direct also warned after the market shut. There is also a rumour the BBC's Watchdog programme is planning to run criticism of the industry on Monday night.

A couple of smaller companies raised new funds via placings yesterday, although there was a mixed reaction among market makers to both. Corvus Capital, the investment vehicle of Andrew Regan, placed 24.35 million new shares at 12p per share with institutions, netting just over £3m in new funds. The shares firmed 0.75p to 14p. Meanwhile, the hydrocarbon fuel exploration and production group Empyrean Energy raised £5m of new capital by placing 14.3 million new shares at 35p each, a substantial discount to Thursday's closing price. Some market insiders said the placing was badly priced, and the stock closed 4.5p worse at 43.5p.

Finally, I-Mate, an AIM-listed provider of customised software for phones and pocket computers, tanked following a profit warning. The group blamed supply chain problems. The shares fell87p to close at 89p.