Market Report: CWW advances as bid potential is highlighted
Saturday 16 April 2011
Bargain hunters looking for a cheap way to invest in a potential bid target were told to dial into Cable & Wireless Worldwide (CWW) yesterday, as the telecommunications group advanced up the mid-tier index.
CWW is frequently the subject of takeover gossip and the latest speculation has been helped by its weakness following its demerger from Cable & Wireless Communications in 2010. Since then, it has lost more than 40 per cent of its share price, a large chunk of which was wiped out after it issued a profit warning last month, but last night it closed 1.15p ahead at 51.75p.
The bid talk was revived by Investec, which upgraded CWW's rating to "buy" after saying the group could attract a bidder. Pointing out that the UK telecoms sector currently has "no nationally integrated incumbent operator of both fixed and mobile services", the broker said it did not believe the situation would last.
Its analysts said they therefore saw the group – as well as Colt, up 3.2p to 149.9p, and TalkTalk, up 1.2p to 141p – as possible targets, adding that "at current share-price levels, CWW looks to us to be the most attractive currently, and certainly ostensibly cheaper than it has ever appeared before".
Its assets, they added, meant that not only could it tempt a UK mobile group, but a number of international companies as well, including France Telecom and the US groups Verizon and AT&T, which has often been linked with CWW.
Also benefiting from analysts raising takeover hopes was Imperial Tobacco, which shifted up 37p to 2,042p. The bid spotlight was on the cigarette manufacturer after Goldman Sachs predicted merger-and-acquisition activity in the sector could spark into action, and that the blue-chip group was "the most likely target". The broker said it could even be approached by British American Tobacco, which added 33.5p to finish at 2,567p.
Overall the FTSE 100 came close to pushing back above the 6,000-point level, but when the bell rang it was just short at 5,996.01, a move forward of 32.21 points.
Reckitt Benckiser may have soared up 85p to 3,200p, but the consumer goods giant was nowhere near regaining the losses it suffered on Thursday. That drop came after it announced the retirement of its long-standing chief executive Bart Becht, and Collins Stewart moved quickly to dampen down speculation that his departure could make it a possible takeover target. Describing the idea as "straw-clutching", its analysts said that "quite apart from anything else, Reckitt remains a $45bn-50bn transaction, which rather limits the possible suitors".
Unilever continued to surge forwards as it benefited from a read-across for the second consecutive day. After rising earlier in the week following strong results from the French group Danone, the Anglo-Dutch consumer goods giant yesterday put on 28p to 1,970p after Nestlé's numbers beat expectations.
Giving hungry analysts a sneak preview of its summer food range seemed to work for Marks & Spencer after its new lines received praise, including from Arden Partners' Nick Bubb, who said he has "no doubt that M&S Food will be the staple choice for all the picnics in the stockbroker belt". The high-street institution was boosted forwards 3.7p to 374.5p, helped as well by John Lewis's latest sales figures.
The downgrading by Moody's of Ireland's government debt, plus disappointing results from Bank of America, left the banks in the red, with Royal Bank of Scotland sliding 0.86p to 42.67p.
Micro Focus was stranded at the bottom of the FTSE 250 as the market reacted with shock to the immediate departure of its chief executive, Nigel Clifford. In early trading the software company touched 261.1p, but it rallied slightly to close at 291.8p, a loss of 24.5p, amid vague suggestions it could now be more attractive as a possible takeover target.
Investors were betting on Ladbrokes, as the gambling company climbed 9.4p to 144.3p following its first-quarter results, and others in the sector received a boost too, with William Hill and Bwin.Party advancing 10.5p to 196.3p and 3.5p to 131p respectively. Ladbrokes also revealed that its takeover discussions with 888, which started back in December, have ended, and the small-cap group retreated 6.75p to 34.75p.
National Express was shifting up the gears, driving forwards 5.8p to 260.1p, after its activist investor Elliott Advisors – which is campaigning for a shake-up among the group's directors – said it should consider a merger.
The hedge fund suggested the idea to investors as part of a range of options it believes National Express could adopt, but the transport company reacted angrily, describing the proposals as "focused on the short term".
On the Alternative Investment Market, Norseman Gold lost nearly half of its share price, sliding 14.75p to 16.25p, after the yellow metal miner cut its production forecast and announced that it expected to see an operating loss for the year.
FTSE 100 Risers
Man Group 250.6p (up 10.2p, 4.24 per cent)
Takes top spot after Bank of America Merrill Lynch praises the hedge fund manager.
British Land 569p (up 17p, 3.08 per cent)
One of many property groups to rise as JP Morgan Cazenove issues generally bullish note on the sector.
Autonomy 1,577p (up 32p, 2.07 per cent)
Software company moves forwards ahead of the release of its first-quarter results next week.
FTSE 100 Fallers
Rio Tinto 4,316p (down 34p, 0.78 per cent)
One of a number of miners under pressure as China's inflation rises to its highest level for 32 months.
Invensys 321p (down 2.3p, 0.71 per cent)
Engineering group retreats after Barclays reduces its price target to 370p from 385p.
Whitbread 1,675p (down 10p, 0.59 per cent)
Owner of Costa Coffee tracks back following three consecutive days of gains.
FTSE 250 Risers
PZ Cussons 339.1p (up 11.1p, 3.38 per cent)
Soap and shampoo manufacturer recovers almost all of Thursday's losses.
Hikma Pharmaceuticals 750.5p (up 14p, 1.9 per cent)
Announces it has bought a stake in the Indian group, Unimark Remedies.
Thomas Cook 165p (up 0.5p, 0.3 per cent)
Travel company sees small uptick after shedding more than five per cent in last six sessions.
FTSE 250 Fallers
Salamander Energy 300.3p (down 12.4p, 3.97 per cent)
Oil and gas group retreats as it announces that it is suspending a well in Thailand.
WH Smith 470.9p (down 4.2p, 0.88 per cent)
Retailer hit by profit-taking following its large advance on Thursday.
Balfour Beatty 330p (down 1.9p, 0.57 per cent)
Creeps back after selling its trackwork manufacturing unit to Caterpillar.
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