Market Report: Aegis back in spotlight over possible Dentsu link-up

  • @greentoby

There's just no escaping the takeover spotlight for Aegis. The Square Mile was once again talking up the bid potential of the advertising group yesterday as it continued its storming run amid hopes that the recent break-up of two of its rivals means it could find itself an admirer.

Long considered a possible takeover candidate, Panmure Gordon yesterday claimed that the chances of it being snapped up were on the rise after the Japanese marketing giant Dentsu's strategic alliance with Publicis came to an end last month.

With the French firm buying back over €640m-worth of its own shares, Panmure's Alex DeGroote noted that not only did Dentsu now no longer have a European partner, but that it was also sitting on a large amount of cash, leading the analyst to suggest that "Aegis could fit the bill".

One major hurdle long believed to be standing in the way of Aegis being taken over is the large stake held by the French financier Vincent Bolloré, who is also chairman of its Paris-based peer Havas. However, Mr DeGroote suggested that with Mr Bolloré "sitting on a very nice book profit in Aegis ... [he] may be tempted to cash in".

The analyst also praised the recent $250m acquisition of the US agency Roundarch, saying it "helps strengthen further [its] market position" in the country. As a result he increased his price target to 22p while keeping his "buy" advice, and the group – currently trading at its highest for more than a decade – ticked up another 1.1p to 175.95p, continuing a rally in which its share price has added over 50 per cent in less than five months.

Traders in the Square Mile had little to keep them occupied during a quiet end to the week as the FTSE 100 eased back 20.12 points to 5,911.13. Spain's announcement that its deficit for the year would be higher than the target agreed with the EU was hardly encouraging, although this did not hold most of the banks back.

Barclays and Lloyds both closed near the summit, jumping 5.6p to 256.75p and 0.86p to 35.64p respectively after Goldman Sachs upgraded its advice on the banks to "overweight". "Despite the recent strong performance we think there is more upside," said the broker's analysts, citing an improvement in liquidity following the ECB's recent offerings of cheap loans.

International Power was in the gold medal position as speculation continued to swirl that GDF Suez may soon try to buy the 30 per cent of the power generator it does not already own. Espirito Santo pointed out that although the tie-up from the original deal does not expire until August, GDF is still able to make a move earlier, with the broker's analysts saying that the "sooner they go for a buyout ... the less chance of the stock rallying beforehand".

With the vague rumours suggesting a possible price of 450p a pop, International Power shot up another 15.4p to 365.5p as it also revealed supply deals with the Indonesian state-owned utility PLN. It means the group has surged over 10 per cent in the last three weeks, leaving it at its highest share price for over four years.

Most of the miners were in the red, with Kazakhmys left with the wooden spoon after Numis Securities told investors to sell up following its trading update on Thursday. Glencore (down 7.15p to 420p) and Xstrata (down 15.5p to 1,196.5p) were also weaker ahead of the former's final results on Monday, which many expect to come with more details on the proposed merger between the two.

Elsewhere, BG Group slipped 3p to 1,523p as UBS said that during a recent field trip to Brazil the explorer "gave a pretty clear message that ... a partial sell-down of [its operations in the country] is not imminent".

Down on the FTSE 250, Rentokil Initial slumped 4.45p to 76p after the ratcatcher admitted that its troubled City Link courier business was likely to post another loss in 2012.

Meanwhile, SVG Capital retreated 7p to 274.2p as Oriel Securities' Iain Scouller advised banking profits following its recent rally in which the private equity investor has powered up more than 70 per cent since unveiling plans in December to return £170m to shareholders.

Cove Energy was knocked as low as 193p on AIM after Canaccord Genuity slashed its target price to 190p, despite the explorer having already received a 220p approach from Thailand's PTT. The broker made the move as a result of the news that the Mozambique government want to introduce a capital gains tax which would apply to the proposed sale of the group.

The oil firm – which found out last Tuesday that India's ONGC and GAIL could make a counter-bid – did manage a partial recovery, closing 18.5p worse off at 207.5p. However, Merchant Securities' Brendan Long warned that the developments have "very serious ramifications for explorers across Africa" as Ophir Energy slipped 7p to 427p on the mid-tier index.