Market Report: Go-Ahead moves into fast lane for takeover gossips

  • @greentoby

Despite high hopes at the start of the year, takeover activity in the Square Mile ended up being rather subdued during 2011. However, punters praying the next 12 months may prove to be different will have been cheered yesterday by the revival of takeover talk around a number of stocks. One of them was Go-Ahead, the transport group which has been frequently suggested as a possible target. Vague rumours of a potential approach were doing the rounds last November, and yesterday it was back in the spotlight thanks to Liberum Capital.

Analysts from the broker said the company could be "a prime candidate" for a move from a European peer. Speculation that a bid for one of the UK bus and rail groups could emerge from the continent has been high ever since Germany's Deutsche Bahn paid £1.59bn for Arriva in 2010.

Yet with Liberum keeping its "hold" advice on Go-Ahead and warning that it was the "most operationally geared" in the sector, the group ended up easing back 1p to 1,380p.

It wasn't the only stock shrugging off renewed bid chatter despite vague rumours, which traders played down, doing the rounds of an imminent deal involving an anonymous mid-cap company.

Bodycote dropped 3.1p to 277.9p even though Panmure Gordon's Oliver Wynne-James repeated his belief that the "sizeable" returns it offers makes "corporate activity... a possibility".

However, Logica flew up 1.85p to 70.3p after Singer Capital Markets put the business and technology services group on its Best Ideas list, saying that, with the group having received a number of approaches recently, the broker did not see any "diminishment of the appeal of [its] assets".

In early trading the FTSE 100 made a valiant effort to stretch its rally to a fourth straight session, at one point moving to its highest level for five months. Yet, with the Square Mile still quiet following the Christmas break, and disappointing factory orders figures from the United States, the top-tier index ended up being pegged back 31.46 points to 5,668.45.

The banks were being hit by news from Europe that Unicredit was struggling to raise capital, with Lloyds and Royal Bank of Scotland declining 0.45p to 26.6p and 0.25p to 20.76p. Italy's biggest bank launched a rights issue at a huge 43 per cent discount, prompting a major fall in its share price and eventually a suspension in trading.

Also behind was BSkyB, despite Numis Securities choosing the satellite broadcaster as one of its recommendations for the year. The group dipped 12p to 730p as dealers cited reports claiming Microsoft and Google could be interested in the rights to show live Premier League football. While many of the commodity stocks, such as Glencore, down 13.15p to 404.78p, were knocked by falling metal prices, oil continued to move higher. It helped bump BP up 2.4p to 473.43p, while BG was 1p stronger at 1,429.5p after India's ONGC agreed to take control of the group's stake in three blocks off the shore of the country.

Down on the FTSE 250, Micro Focus' turnaround continued to attract plaudits, as it touched a 10-month high before it eased down to finish 7.1p better off at 393.8p. It was a different story in August when, following a number of profit warnings, the IT group dropped below 240p before long-running takeover talks ended without a bid being made.

As well as hopes that possible suitors could have another go at some point, another driver behind Micro Focus' revival was last month's announcement of a 45p special dividend.

Collins Stewart's analyst Jonathan Imlah claimed there could be more, saying investors should "look forward to material cash returns over the next couple of years" as he upgraded his rating on the stock to buy.

The retail sector was under pressure after Next (down 85p to 2,655.5p) disappointed with its post-Christmas trading statement. Marks & Spencer, which announces its figures next Tuesday, slipped 8.2p to 308.8p while Argos-owner Home Retail slid back 3.25p to 90.95p, having climbed nearly 13 per cent on Tuesday.

In early trading, China Africa Resources jumped to 32.9p, meaning it had more than doubled in fewer than four sessions. Management at the AIM-listed lead and zinc producer were clearly taken by surprise and decided to issue a statement denying that they knew of any reason for the move, although by the bell it was still 1p higher at 29.5p.

The small-cap haulier Wincanton was pushed up 2.25p to 68.25p after announcing it had refinanced its bank facilities in the wake of the recent completion of the sale of its remaining mainland European businesses.