SHARES AND MARKET REPORT: Traders scramble for Egg amid renewed bid talk

CITY PUNTERS were busy piling into Egg shares from the start of trading yesterday, convinced that Prudential, the internet bank's biggest shareholder, is finally going to sell the group. Egg, where Prudential has a 79 per cent stake, saw its shares close 8.75p higher to 116p in heavy trading.

However, the rumours are by no means new and if they do prove to be correct it will not be the first time that Prudential has tried to divest of its offshoot. The insurer spent most of last year trying to sell the company but failed leaving many in the City disappointed. It is believed to have held extensive negotiations with Royal Bank of Scotland and MBNA, the US credit card giant.

At the time, rumour had it Prudential wanted 200p a share for its stake in Egg, which valued the whole company at pounds 1.6bn. But analysts believe it is unlikely to achieve such a price tag today. Since the deal fell through, Egg has been busy tidying up its affairs and has done well to sell-off its loss-making French division to the Dutch financial services group, ING.

In the FTSE 100, Exel dropped 41p to 832p as bid rumours subsided. Also weighing on the stock was a downgrade from Bear Stearns. Cutting its stance to "neutral" from "outperform", the US broker argued that there is no hard evidence to suggest that a takeover of Exel is imminent.

Meanwhile, BT gave up 3.5p to 204.25p after Morgan Stanley was heard warning its clients that the telecoms group faces increasing competition in the UK. The US broker believes that margins at BT will contract by more than is being expected by the market. especially at its broadband and outsourcing divisions. It set a price target of just 117p on the stock.

ICI gained 7p to 239.75p as punters bet that the chemical group's upcoming results are set to impress. Likewise, Roxboro ticked 6p to 345p on talk that the group will soon post a solid set of figures.

Unilever added 16p to 524.25p as Morgan Stanley tipped the consumer goods giant to stage a comeback over the coming year. "With sentiment towards the stock almost universally negative, we think investors have the opportunity to build positions in Unilever before the consensus turns more positive," the broker said. Morgan Stanley owes its bullish stance to, among other things, evidence that market share declines at the group are stabilising.

Corus added 2.5p to 55.5p on volume of over 124 million shares amid vague whispers of a possible takeover of the steel group by Germany's ThyssenKrupp. Rentokil Initial closed higher for the third session in a row, gaining 4.75p to 157.75p, on talk the support services giant is close to appointing a new chief executive. The absence of a chief executive has led to talk that the company is vulnerable to an opportunistic bid from a private equity player.

JD Group jumped 17.5p to 275p on rumours the retailer will be next in the sector to get a takeover approach. Seymour Pierce, however, were not so sure about the speculation. The broker said: "Although it is known that the founders of JD Group are potential sellers, we think the rise in the share price has been due to upgrades to forecasts following the company's Christmas trading statement." JD's founding directors control more than 40 per cent of the retailer. Elsewhere in the sector, JJB Sports fell 3.5p to 210.25p, Matalan lost 1.5p to 231p and MFI gave up 1.25p to 134p after Deutsche Bank slashed its rating on the trio to "hold" from "buy".

The German broker warned investors that 2005 is likely to be the toughest year of the decade so far for the UK retail sector. It fears that not only is consumer spending continuing to slow but that most retailers are likely to see a significant increase in costs over the next 12 to 18 months.

Among smaller companies, Hot Group, the online recruitment specialist, was steady at 13.75p, despite the sale of 5 million shares at 12p. Hot is due to post full-year results at the end of the month. Not so long ago Numis Securities, its house broker, was forced so slash its forecasts for the company after a severe downturn in trading.

Gaming Corp rose 0.63p to 3.25p after directors pile into the online gaming specialist. Jason Drummond, the chairman, led the way with the purchase of 3 million shares at 3p while Damien Greef, a non-executive, picked up a more modest 300,000 at the same price.

Eureka Mining added 2.5p to 158.5p on whispers a leading broker is poised to publish an ultra-bullish note on the mining group. Last month, Eureka Mining announced the purchase of a 51 per cent stake in a gold project in southern Russia and it is this deal that is believed to have excited analysts at the broker in question.