Market Report: Merger rumours keep lines busy at Colt Telecom

COLT TELECOM was one of the market's hot shots yesterday as traders picked it as the next target in the consolidation-mad phone sector.

While the market scored a victorious century, buyers kept Colt's line busy for most of the day and the stock ended 68p better at 1,403p, not far from its 1,437p all-time high.

The rumour doing the rounds is that Colt is lining up a merger with a rival to capitalise on its extraordinary success.

Floated three years ago at around pounds 250m, Colt has grown into a blue-chip with a market value of over pounds 8.5bn without posting a single penny in profit. The soaraway increase was due to a simple reason. Investors love the company's plans to link large European cities with a network of fibre-optic cables to offer phone and Internet services to business users and have piled into the loss-making group's shares.

Their faith may about to be rewarded. According to yesterday's whispers, Colt could be about to pull the trigger on a tie-up with a European or UK rival. The continental names in the frame are the usual German suspects: Deutsche Telekom and Mannesmann.

But the more interesting choice would be a link-up with Energis, up 54p to 1,727p. The UK business telecom group is believed to be building a stake in new entry Kingston Communications, up 6.5p to 334.5p and dealers believe a three-way merger is a possibility. Energis, Kingston and Colt are all in the high-margin business telephony and have complementary geographical strengths.

A combined group would have a sizeable presence in both the UK and European markets. Moreover, an all-British merger would be a bulwark against the predatory instincts of the likes of Deutsche Telekom, which has long been rumoured to be interested in Energis.

The cable groups vied with their telecom peers for the title of most bid-friendly sector. News that NTL could sell a minority stake to France Telecom and use the cash to bid for Cable & Wireless Communications caused a 23.5p-rise to to 720p in CWC's stock. The pounds 8bn price tag put on CWC sent rival and mooted merger partner Telewest Communications to the top of the FTSE 100 risers with a 26.25p jump to a best-ever 319.25p.

Retailers were also in the bid frame. Speculation that Kingfisher, down 8.5p to 721p, was to bid for Safeway, up 2.5p to 239p, was given another spin. A more intriguing whisper was that Kingfisher could bid for PC-seller Computacenter, up 36.5p to 567.5p, and add it to its Comet chain.

This rumour bonanza, combined with a benign set of US inflation data, triggered a stormy rally among blue-chips. The FTSE 100 closed 101.9 higher at 6,575.0 within a whisker of the day's peak. The positive sentiment spread to the undercard, with the FTSE 250 ending 13.9 higher at 6075.5 and the Small Cap finishing 4.3 better at 2746.8.

The big hitters were all out in force. Financials roared ahead on bullish research and bid rumours. Illiquid Schroders soared 99p to 1525p as Merrill Lynch said "accumulate" and whispers of a Goldman Sachs strike persisted. Legal & General cashed in a 9.75p rise to 165.25p in high volume on bargain hunting and revived talk of a bid, possibly from Lloyds TSB, up 49p to 879.5p.

Reuters made the headlines, climbing 56p to 903p after the successful US flotation of its Internet software division Tibco. The sharp rise in Tibco's shares price valued the information giant's 63 per cent stake at over pounds 780m.

The market's two largest stocks threw their weight behind the rally. BP Amoco, the biggest of the lot, drilled a 26p advance to 1,285p after unveiling $10bn of asset disposals and a set of tough financial targets. Vodafone Airtouch, the second-biggest blue chip, rose 33p to 1,334p after Goldman Sachs lifted its price target to 1,600p.

Granada beamed 36p higher to 663p. The market believes that the recent stake in Liverpool Football Club may soon be followed by other buys. Whispers of a disposal were also heard. In the football sector, Loftus Road, the owner of Queens Park Rangers scored a 4p advance to 14.5p after receiving bid approaches, while Nottingham Forest firmed 1p to 36.5p on talk of an imminent takeover offer.

Among the fallers, Marks & Spencer shed 11p to 377.5p as the predicted grim trading update triggered downgrades. Analysts' downgrades upset drug giants SmithKline Beecham, down 14.5p to 825.5p and AstraZeneca, 39p lower at 2306p. However, pharmaceutical midcapper Medeva shot up another 7.5p to 143p on talk of a bid from rival Shire, down 3.5p to 580p. Sector peer Skyepharma firmed 4.75p to 53.25p on vague bid whispers.

J Sainsbury, down 4.25p to 396.25p, was on the reject shelf after analyst Paul Smiddy at Credit Lyonnais said "reduce" and reduced his forecast. Next, 27p lower to 751p, was also hit by CL's bearishness.

Pub group Greenalls frothed 11p higher to 379p. Rumour has it that Whitbread, up 18p to 947p could have a go after pulling out of the race for Allied Domecq's pubs. Wolverhampton & Dudley, down 2.5p to 616p, could also bid for Greenalls, after Greene King trumped its bid for Morland, up 14.5p to 530p, with a 512p-per-share offer.

First Group, the transport giant, sped 17.5p up to 329.5p after a roaring trading update. However, the IT group Admiral plummeted 45p to 800p on fears that the forthcoming interims will be poor. Discount retailer Matalan was hammered 37.5p lower to 917.5p by profit-takers, while JJB Sports was kicked 19p higher to 337.5p by hopes of improving sales.

Bookie Surrey Group was the tiddlers' safe bet. The stock firmed 1p to 3p on rumours that the takeover by Sports Internet could be pitched at around 5p-per-share.

Electronic group Feedback surged 23p to 75.5p on talk of major contract wins.

London Clubs moved 11p higher to 172.5p on revived rumours of a 225p bid from Far Eastern investors, while Jarvis Hotels booked a 9p rise to 150.5p amid on-going speculation of a tie-up with French giant Accor. Printing supplier Litho plunged 11p to 138p after a profit warning, while the construction group Vibroplant subsided 4.5p to 61p after the collapse of MBO talks.

SEAQ VOLUME: 1.1bn

SEAQ TRADES: 77,763

GILTS INDEX: 105.98 -0.78

THE INSURER Britannic yesterday found itself victim of the automated trading system for the second time in two months. Shortly after the opening bell, a careless trader inputted an order of 3,700 shares at the absurd level of 427.5p, when the market price was around 1,000p. The stock plummeted 65 per cent and was suspended. The daft order, which mirrored a similar mistake made in May, was cancelled and Britannic closed 55p better at 1030p.

KEEP AN eye on WF Electrical. The distributor of electrical products buzzed 24p higher to 524p yesterday as bid rumours started to circulate. Some cunning buyers believe that WF might have attracted the attention of a bigger player which could launch a bid at a sizeable premium. Sector peer Volex was mentioned, although other UK and overseas rivals could also enter the fray. WF's results, due out next week, should throw some light on the issue.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Sport
Steven Fletcher scores the second goal for Scotland
cricketBut they have to bounce back to beat Gibraltar in Euro 2016 qualifier
News
news
Arts and Entertainment
Chris Evans is the favourite to replace Jeremy Clarkson on Top Gear
TV
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing