Market Report: Kingfisher and Energis fail to energise FTSE

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The Independent Online
ENERGIS AND Kingfisher yesterday flew the flag for telecoms and retailers, two of the most bid-friendly sectors of recent times.

The two companies were linked by a common fate - they rose for perfectly normal reasons and yet dealers could not stop speculating about intriguing takeovers.

First, Energis. The telecom group jumped 45p to 1,664p in fairly good volume. The obvious cause for this increase was a note from broker HSBC.

The Hong Kong bank, whose investment arm owns a 3 per cent stake in Energis, reiterated its 2,070p price target and advised clients to buy. According to analyst Stephen Howard, Energis will benefit from the imminent break- up of BT's monopoly of local phone lines.

But mere analytical support was not enough to satisfy the traders' scheming minds. They immediately started talking about a giant takeover for the group.

Rumour has it that Energis is on the bid radars of a couple of European players keen to get a foothold in the UK. The name on most traders' lips is Deutsche Telekom.

The German giant has fallen behind in the race for One2One, Cable & Wireless' mobile phone business, and could turn its cash pile on Energis.

The rumour bill suggests that any bid will have to be pitched at around pounds 6bn - a 20 per cent premium to the current share price - to convince Energis shareholders, including the 10-per-cent holder National Grid, to sell. National Grid was up 4.75p at 439p.

Kingfisher's tale was similar. Shares in the B&Q-to-Woolworths retail group jumped 17.5p to 749p amid analysts' optimism for their recent acquisition of a French Internet business. Some experts believe the web service provider could replicate the success of Freeserve, Dixons' soon-to-be floated Internet arm.

However, some imaginative souls said the share price rise will increase the chances of a Kingfisher offer for Tesco, down 1.75p to 167.75p, after Warburgs clipped its forecasts. According to these whispers, Kingfisher will wait until the shares reach 900p to mount a paper offer for the supermarket chain.

Once again, bid rumours failed to stir a tired market. The FTSE 100 hardly moved, ending 5.3 better at 6,562.6. A firm opening on Wall Street and an improving bond market provided some support but trading remained lacklustre for most of the session.

The second liners were also dull, but at least the FTSE 250 reached another all-time high after rising 5.1 to 6,078.3. The Small Cap inched closer to its own record with a 8.9 increase to 2,722.1.

Popular takeover rumours did the rounds among the blue chips. The fund manager Amvescap soared 36.5p to 641p amid returning talk that Goldman Sachs is sniffing around.

Eternal target Reckitt & Colman was back, jumping 11p to 717p. Unilever, 22.5p higher to 648.5p amid hopes of buoyant sales in emerging markets, and AB Food, 14.5p better at 439.75p, are the mooted predators.

Royal Bank of Scotland cashed in a 43p advance to 1,321p. The market thinks a bid for Barclays, up 1p to 1,822p, is still possible.

BG put on another 8p to 405.25p on continued talk of interest from Elf or Shell, up 3.75p to 536.25p, while publisher Reed climbed 14.75p to 488.5p on hopes of a takeover from a Dutch rival.

Lack of takeover news hit EMI, down 21.25p to 539.25p. The music group also suffered from profit-taking after the successful US float of a 50- per-cent owned Internet business.

Away from bid rumours, pest control group Rentokil Initial flushed 1p higher to 232.5p in big turnover after Goldman Sachs started coverage with a 275p price target.

A slump in copper prices hit Billiton, down 9p to 239.5p, and Rio Tinto, down 28.5p to 1,164p.

Trafficmaster led the Mid Cap higher, surging 59p to an all-time high of 519p. Traders are keenly awaiting a major deal with a German car maker and are even talking of acquisitions.

Travel group First Choice flew 11.5p higher to 203p after Thursday's rejection of the merger with Swiss rival Kuoni. Airtours, up 11.5p to 528.5p, could rebid if allowed by the regulator, and Germany's Preussag could also be interested.

The software group Merant, the old Micro Focus, buzzed 25p higher to 302.5p after a successful analysts' seminar.

The hunt is on to find the next takeover target in the chemical sector after the recent bid for Brent International, flat at 116p. Elementis, 5.5p better at 114p, British Vita, 12p higher at 261.5p, Croda, up 13.5p at 314p, BTP, 19.5p higher at 482.5p, and Laporte, up 8p to 788p, are all in the frame. Bid talk and a new chairman pushed paper group DS Smith 4p higher to 152.5p.

The engineer TT Group, recently hit by a profit-warning, is another rumoured bid object. The shares jumped 3p to 132.5p in good volume amid talk of an overseas strike. Leisure giant Rank plummeted 17.25p amid frustration at the lack of disposal news.

Reflec, the ink manufacturer, was the pick of the minnows. The AIM-listed group surged 1.75p to 4.37p after investor John Frye increased his holding to 10 per cent.

Electronic group Feedback surged 18p to a 12-month peak of 59.5p on rumours that a large contract win is close.

Danka Business, the struggled photocopier maker, rose 19p to 127.5p after a rare upbeat trading statement.

AB Airlines nosedived 3p to 15p after the predicted discounted placing and open offer arrived.

SEAQ VOLUME: 1.1BN

SEAQ TRADES: 78.123

GILTS: N/A

THE CATERING tiddler Availeon is on a roll. One of its subsidiaries yesterday won a five-year contract from garden-centre retailer County Gardens to operate a 100-seater restaurant in its site in Harlestone Heath, near Northampton. Availeon is also believed to be close to clinching a deal to supply the Royal Pump Rooms at Leamington Spa. The contract could prop up the group's share price, which has fallen from over 33p four years ago to yesterday's 2.75p.

KEEP AN eye on the biotechnology minnow Biocompatibles International. Shares in the maker of coronary stents to fight heart disease yesterday jumped 9p to 117.5p as a couple of buyers appeared on the horizon. The rumour is that the group is developing a new version of the stents, which could trigger the interest of a foreign buyer. Leading US players such as Guidant, Medtronic and Boston Scientific could be looking at bids.

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