Market Report: Competition fears force Aggreko to power down

Investors pulled the plug on Aggreko last night over fears its market leader status could be in jeopardy, leaving the temporary power supplier at the foot of the top-tier index.

The group, which will supply the electricity for next year's Olympics, moved 61p lower to 1,874p following the news that APR Energy – its closest competitor in the power generator market – is to be bought by Horizon Acquisition, the investment vehicle owned by Pizza Express co-founder Hugh Osmond.

The $855m (£527m) deal will see Horizon, whose shares were suspended at 950p, take APR's name when trading is resumed, expected to be by the end of September. It will also leave the company with $275m in cash to fund its expansion plans, prompting Numis Securities to cut its advice on Aggreko to "sell", warning the move may "herald a significant increase in competition".

"Although we believe there are sufficient growth opportunities for both groups," said the broker's analyst, Mike Murphy, "the hint of more competition as well as an alternative stock market play on the shortage of power in developing countries suggests there may be some profit-taking in Aggreko."

Overall, the FTSE 100 – which plummeted by more than 90 points on Friday – saw a small rebound of 7.66 points to close at 5,773.46, with continued caution over the global economic situation preventing a stronger bounce.

Takeover hopes fuelled the ascent of Eurasian Natural Resources (ENRC) to the top spot, as the miner shifted 34.5p to 776.5p following reports over the weekend that Glencore could be interested in making a potential offer worth £12 billion. Saying the commodities trader "will be keen to look at opportunities in the market for an acquisition", Guardian Stockbrokers' Atif Latif predicted that "merger and acquisition frenzy could return to the sector", and added ENRC's recent weakness meant Glencore may not be the only possible aggressor.

However, Collins Stewart said that "political ramifications make the deal unlikely", although the broker did concede an offer from Glencore for Kazakhmys' 26 per cent stake in ENRC was "more realistic".

The copper miner powered 26p to 1,235p as it agreed a $1.5bn loan from China which will be invested in its Aktogay deposit in Kazakhstan. Meanwhile, Glencore put on 14p to close at 523.4p, ahead of today's interim management statement, its first update since listing last month.

It may be good news for Spanish smokers, but the country's ongoing cigarette price war forced Imperial Tobacco to admit its full-year operating profit could be reduced by up to £110m as a result and the group shed 29p to 2,056p. Citigroup said a reversal of the price cuts would be unlikely, warning that "the pricing equilibrium [worldwide] has become more fragile for all the tobacco companies, as they now all want to boost market share".

After losing nearly 7 per cent last week, Smiths Group failed to finish ahead for the fifth consecutive session, edging back 1p to 1,122p. RBC did not help, reducing its target price to 1,000p following last Wednesday's interim management statement, and the broker also dealt a blow to those praying for a break-up, saying such a move was "neither likely or in shareholders' interests [in the] near term".

Investors were persuaded to take a punt on Ladbrokes on the FTSE 250, with the group jumping up 1.9p to 146.9p after Peel Hunt increased its advice to "buy". The broker said a number of factors, including the popularity of gaming machines, meant the time was "right to take a more positive stance on the land-based bookmakers", although its reiteration of William Hill's "buy" rating only prompted it forwards 1.5p to 218.7p.

The London Stock Exchange advanced 5.5p to 949p as the Maple Group – a consortium of Canadian banks and pension funds – launched its $3.8bn rival bid for the Toronto Stock Exchange. Elsewhere, market gossips continued to get excited about Northumbrian Water, with the latest revival of vague bid speculation pushing it up 4.9p to 387p.

BAA's announcement that its airports saw a 9.2 per cent year-on-year rise in traffic last month meant International Airlines Group and easyJet both gained altitude, climbing 2.5p to 224.8p and 2.4p to 354.9p respectively. The news prompted Panmure Gordon to highlight the "positive backdrop" for the Restaurant Group, whose chains – including Frankie & Benny's and Garfunkel's – operate in a number of airports, and the company ticked up 1.6p to 296.2p.

Down on the Alternative Investment Market, Sterling Energy dropped nearly 25 per cent after the explorer said its new well in Kurdistan was not able to produce gas at a commercial rate, knocking it back 10.5p to 35p.

At the other end, AssetCo – which provides London's fire engines – shot up 1.31p to 4.95p following the troubled outsourcer's announcement that it is once again in talks over a potential takeover with "a number of parties".


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