Market Report: Experts pour cold water on bid talk

Traders have spent this year trying to flush out takeover deals for water groups including Pennon and United Utilities. But yesterday experts at HSBC washed out any hope of M&A, blaming regulatory uncertainty as the cause.

The shares in the water groups have trickled upwards on hope of consolidation and HSBC points out that both United Utilities and Severn Trent are trading on a 12 and 13 per cent premium to March 2014. But it thinks the "exuberance of the market for M&A should be tempered" ahead of a review of capital structures set by the water and sewerage provider regulator Ofwat.

Instead, HSBC advises any would-be suitors to "wait for visibility on Ofwat's approach to high leverage and to acquiring assets at the beginning of the next year period in 2015, giving four years benefit of the cost of capital differential."

Pouring cold water on bid talk was followed by a 10.5p dip in Pennon to 675p, but United Utilities dribbled up 5p to 745.5p

HSBC's note came as the energy regulator Ofgem launched an investigation into six suppliers over failing to meet all the targets on providing consumers with efficiency measures.

Ofgem said energy providers had achieved 99 per cent of the targets but Centrica's British Gas, Drax, Scottish Power and SSE had missed targets.

The blue-chip index started the day with a good run. Most of the European markets were closed for May Day, but after the US opened the benchmark index followed it down. The FTSE 100 closed up just 21.17 points to 6,451.29.

Taking the wooden spoon was the troubled Kazakh miner ENRC, which is the subject of a Serious Fraud Office investigation. It emerged that the Russian billionaire Suleiman Kerimov has bought close to a 3 per cent stake and it dug down 11.6p to 262.8p.

Shares going ex-dividend joined it, with Admiral down 40p to 1,241p.

The publishers Pearson and Reed Elsevier were in focus. Analysts at UBS are concerned for future growth at Reed and downgraded it to neutral, and it retreated 23p to 729p.

Analysts at Liberum Capital laid out the problems facing the Financial Times publisher Pearson, highlighting issues in its education business, and rated it a sell. But the shares managed to add 12p to 1,183p.

The long-awaited mega-deal of the commodities giant Glencore and miner Xstrata will complete today. Xstrata ceased trading on Tuesday night. Glencore was 2.65p worse off at 314.3p.

Over on the mid-cap index it was Ophir Energy's time to shine. Nearly a year after making a gas discovery off the coast of southern Tanzania, yesterday the African-focused explorer reported better than expected results. Ophir's partner BG Group, which has been investing in the region, will also benefit.

The news also reassured those who were concerned that Ophir had passed its best – its shares declined this year from highs of 650p last year.

In February Britain's richest man, the Indian steel tycoon and Queens Park Rangers part-owner Lakshmi Mittal, sold half of his stake at 475p. The shares slumped following the news, but yesterday Bank of America Merrill Lynch rated the shares a buy, and upped its price target on news of the well to 575p, from 498p. Ophir was 1.6p better off at 408.5p and BG added 5p to 1,089.5p.

Analysts said the news that Cineworld's acquisition of the Picturehouse cinema chain had been referred to the Competition Commission was not bad news for the stock and Peel Hunt rated it a buy. The shares showed a 7.75p rise to 297.25p.

The small-cap rubber engineer Avon Rubber reported solid half-year results. The group makes rubber products including respiratory devices, rubber tubes for dairy milking and gas masks for the defence sector, and it bounced 6p to 426p.

Oxford Biomedica was 0.35p healthier at 2p after announcing a deal with the Swiss pharmaceutical group Novartis to work on a treatment of cancer cells.

The drug-testing group Cyprotex has won a long-awaited contract from the US Environmental Protection Agency and the shares advanced 0.5p to 3.88p.

The AIM tiddler Nostra Terra has bought more land at its Chisholm Trail oil prospect in the US to create a further 16 wells, adding to its four producing wells, and it jetted 0.04p to 0.5p.

Suggested Topics
Life and Style
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
ebookA unique anthology of reporting and analysis of a crucial period of history
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform