Market Report: City ponders new move by Cowdery for Phoenix

  • @greentoby

Could Clive Cowdery rekindle his interest in caging Phoenix? That was the question being considered yesterday as hopes were raised that the tycoon's insurance conglomerate Resolution may have another go at adding the life insurer to its menagerie of businesses.

The groups held discussions last year which ended unsuccessfully despite reports claiming the two were close to agreeing a takeover worth £1.2bn. Phoenix, which is the biggest manager of "zombie" insurance funds in the UK, is still in talks with private equity firm CVC Capital Partners, but UBS suggested yesterday that there could be another twist.

Warning that he was "not optimistic" a deal between Phoenix and CVC would be struck, the broker's analyst, James Pearce, claimed a "rekindling of... discussions [with Resolution] would be mutually beneficial" given it is a "more logical" bidder.

The current incarnation of Resolution started with it snapping up Friends Provident and AXA's UK life insurance operations, among others. However, last February the buyout vehicle put a halt to the spending spree, saying it did not need to make any more purchases to meet its targets and would only therefore consider "very promising opportunities".

Many in the City believe Phoenix could fit the bill, including Mr Pearce. He said the terms of the failed approach appeared "financially attractive" and added that Phoenix's willingness to sell means "a deal could yet be struck on even more advantageous terms".

With the analyst also upgrading his advice to "buy" and praising its promise to buy back another £250m of shares this year, Resolution flew 3.6p higher to 265.6p. Phoenix, meanwhile, had its "neutral"recommendation reiterated yet still ticked up 10p to 549.5p.

Elsewhere in the sector, Mr Pearce also gave RSA Insurance a short-term "buy" rating, although it slipped 0.8p to 109.4p on fears it may be one of the insurers having to make heavy payouts following the tragic Costa Concordia cruise disaster.

With overnight GDP figures from China showing a slowdown in growth that was less than expected, yet still keeping alive the possibility of the country easing monetary policy, the FTSE 100 moved above 5,720 points during the session, which would have been its highest closing level since last August. It was unable to maintain that altitude, however, but still closed 36.51 points ahead at 5,693.95.

This was partly thanks to a terrible last two hours of trading for Essar Energy which knocked the power giant back 45.4p to 127p. The huge, 26.33 per cent fall came after India's Supreme Court ruled it was no longer able to use a scheme to defer sales tax in the country.

There is no stopping Royal Bank of Scotland at the moment, which has now gained almost 24 per cent during its six-day winning streak. The partially state-owned bank announced a $7.3bn (£4.75bn) disposal of its airplane leasing unit, prompting it up 0.43p to 24.85p despite poor results from US giant Citigroup and talk claiming Standard & Poor's could downgrade a number of European banks.

SABMiller was among the blue-chip stocks in the red, sliding 23p to 2,304p after fears were raised over its trading update tomorrow. Liberum's Pablo Zuanic warned the brewer's third-quarter volumes were likely to come in under its medium-term guidance, while he also said he was "sceptical" over recent speculation it could become a target for AB InBev.

Misys was once again the beneficiary of bid rumours, as the familiar tale that the software company may receive an approach helped it up 17.3p to 283p on the FTSE 250. US payment processor FIS walked away from a $2.4bn deal for the group last year, but the latest rumours contained little fresh information.

The top spot on the mid-tier index was claimed by Afren, after the Africa-focused explorer struck oil at one of its wells off the shore of Nigeria. In response, the group – which has been the subject of much takeover chatter recently thanks to the perceived attractiveness of its Kurdistan assets – spurted up 13.48 per cent to 130.5p, its highest share price for over five months.

There was also good drilling news from Cove Energy as the explorer revealed its deepest natural gas find from its Lagosta discovery off the shore of Mozambique. The AIM-listed group has been climbing since putting itself up for sale earlier in the month, and yesterday it advanced another 5p to 138.25p.

Meanwhile, Red Emperor and Range Resources announced drilling had started in Somalia on what they claimed was the first exploration well in the country for over two decades. Yet, with news not expected for a number of weeks, impatient investors decided to bank profits as the two plummeted 20.46 per cent to 17.5p and 18.87 per cent to 10.75p respectively.