Market Report: Aegis rises on talk of move by Bolloré

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The Independent Online

The FTSE 250-listed media group Aegis was strong last night amid speculation about a possible bid or a break-up of the group after its chief executive, Robert Lerwill, steps down at the end of this month.

Analysts said the business was ripe for corporate action, with some suggesting that the group's media buying and market research divisions may be spilt up and others focusing on the French investor Vincent Bolloré's stake in the company.

Panmure Gordon said Aegis may well end up merging with Havas, the French media group chaired by Mr Bolloré. "Aegis and Havas have broadly similar market capitalisations, and operating characteristics, and superficially look a good fit," the broker said, acknowledging that, as an alternative, the break-up story was also "very valid".

Citigroup also weighed in, arguing that a split could unlock significant hidden value.

The prospects took Aegis up 6.8 per cent, or 4p, to 63p.

Elsewhere, analyst forecasts of a slowdown in like-for-like sales growth at Tesco's UK operations prompted vague speculation of a possible profit warning when the supermarket group, down 2.1 per cent or 6.3p at 295.3p, posts a third-quarter update next week. Deutsche Bank and UBS expect ex-petrol growth to slow down to between 1-2 per cent from 4 per cent in the second quarter.

Royal Bank of Scotland reckons growth will retreat to a neat 2 per cent. Given the share price falls and the company's medium and long-term growth prospects, however, the three brokers remain buyers of the stock. Société Générale is less convinced and maintains a "sell" on Tesco. Overall, the FTSE 100, up 61.91 points at 4288.01, struggled for direction as trading volumes remained thin owing to limited activity on Wall Street, which was closed on Thursday and traded for half a day yesterday. The FTSE 250 was also moderately high, gaining 56.68 points to 6,093.32, as investors and traders looked forward to the weekend.

On the FTSE 100, the mining sector fell back after investors took profits from recent gains as metals prices retreated. Lonmin, down 6.7 per cent or 61p at 852p, was the hardest hit and fell to the bottom of the Footsie after South Africa's Solidarity Union said it had been notified that the miner was planning to cut 4,000 jobs at two platinum mines. Antofagasta, down 6.5 per cent or 30p at 432p, fell despite some positive comment from Citigroup, which said the company remained one of its favourites in the sector.

Xstrata, which ended the day before as the strongest stock on the index, was down 3.0 per cent or 28.5p at 930.5p after copper prices fell on news that inventories were at their highest level in more than four years.

Among banks, Royal Bank of Scotland was weak for most of the session after shareholders spurned its open offer, leaving the taxpayer with a 57.9 per cent stake in the company. The stock rallied near the close, ending up a slight 0.3p at 55.3p.

On the upside, Burberry, up 4.9 per cent, or 9.5p, at 205.5p, was the focus of renewed bid speculation with vague market rumours highlighting the possibility of a bid from Coach, the American luxury goods maker. BSkyB rose 6.1 per cent, or 25.25p, to 439.5p, after applying to appeal against the Comp-etition Appeals Tribunal direction requiring it to sell down its stake in ITV, the FTSE 250-listed free-to-air broadcaster that retreated to 35.5p, down 6.0 per cent or 2.25p on the news.

On the second tier, the housebuilder Taylor Wimpey, up 10 per cent or 1p at 11p, continued to trade higher as short sellers scrambled for the exit amid talk that a refinancing deal was im-minent. Traders said some of the strength was also bargain hunters seizing on shares offloaded by AXA, which slashed its holding in the company earlier this week.

The South African investment bank Investec, down 8.0 per cent, or 23.25p, at 266.25p, was weak after Morgan Stanley initiated coverage on the stock with an "underweight" rating and a 200p target price. The broker said it expects earnings to decline by another 31 per cent before touching bottom, adding: "While Investec may be well-capitalised, we estimate that it will roll/refinance around £2.6bn of bank funding over the next 12 months, and we expect this to weigh on the share price as long as international credit markets remain under pressure."

Among smaller companies, Moss Bros was strong, gaining 10.3 per cent, or 1.75p, to 18.75p, after Sir Philip Green's Warbeck investment vehicle sold its stake in the company to a trust represented by Simon Berwin, the managing director of Leeds-based tailor Berwin & Berwin. The trust now holds 29.9 per cent of Moss Brothers.