Market Report: Imperial Tobacco rises on whiff of a takeover

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The Independent Online

Takeover talk sparked up around Imperial Tobacco yesterday, after rumours emerged suggesting the cigarette manufacturer could be in line for a break-up bid.

The group eased forwards 5p to 2,161p in the wake of the vague speculation, which claimed it may be the target of an approach worth 3,500p a share, with companies from both the US and China said to be mulling over a possible move.

Given its position as the smallest of the four largest tobacco companies, Imperial – whose brands include Lambert & Butler – has been the subject of similar break-up chatter before. Back in April, Goldman Sachs said the sector could see a rush of consolidation, picking out Imperial as the "most likely target" and describing British American Tobacco (3.5p behind at 2,793p) and Marlboro-owner Philip Morris as "obvious predators".

However, City voices were treating the latest tale with a pinch of salt, claiming there would be significant anti-trust considerations. Traders, meanwhile, put its small advance – which extended its gains over the past four sessions to more than 7 per cent – to investors choosing the relative safety of defensive stocks.

Despite briefly moving higher during trading, the FTSE 100 slumped 76.42 points to 5,217.63 having risen 4 per cent on Tuesday, its best session for over a year.

With growing concern over the ability of eurozone leaders to reach an agreement on Greece, Lloyds and Royal Bank of Scotland retreated 0.89p to 36.13p and 0.91p to 24.1p respectively while Barclays – revealed by the FSA to be the most complained about bank – was knocked back 2.05p to 166.4p.

Meanwhile, Hargreaves Lansdown and Icap were pushed down 14p to 458p and 16.9p to 429.4p after European Commission president José Manuel Barroso supported calls for a financial transaction tax.

Man Group was by far and away the stand-out stock on the blue-chip index, with the world's biggest listed hedge fund manager shedding nearly 25 per cent. The group sank 59.6p to 180p after admitting $2.6bn had been pulled out by clients since July – its worst quarter for more than two years.

The mining sector was also being sold off, although by nowhere near as much. Citigroup did not help by predicting the price of copper would drop to $7,000 a tonne within the next three months, and although the broker said many of the metal's miners had already discounted this, Rio Tinto moved 139.5p lower to 3,057p while Anglo American fell 62p to 990p.

BG Group claimed the gold medal by powering up 41.5p to 1,262.5p. The explorer was still being supported by gossip on Tuesday that it may receive a bid from China, with Goldman Sachs saying the company's "exposure to some of the most attractive new hydrocarbon developments in the world could attract the interest of national oil companies".

Despite it being nearly three months away, some in the City were already looking towards Christmas, and they were hardly full of festive cheer. Issuing what they called their "alternative Christmas message", analysts from JP Morgan Cazenove warned of "downside risk" for the retailers over the season.

Predicting that forecasts for 2012 were likely to be cut as a result, they went on to add that "current optimism regarding a sector recovery is premature". Among the groups they were particularly worried about was Kesa Electricals, although the Comet owner climbed 1.45p to 86.15.

They also picked out Home Retail, which dipped 3.3p to 116.7 after its chief executive Terry Duddy ruled out closing any of its struggling Argos stores.

Melrose's announcement late after the bell on Tuesday that it was giving up on buying Charter International pushed the manufacturing buyout firm near the summit of the FTSE 250, as it advanced 13.3p to 303.3p.

Panmure Gordon's Oliver Wynne-James greeted the news by reiterating his "buy" advice on the company, with the analyst suggesting it could "re-enter the fray" and recommending Cookson as his "favoured" target. Evolution's Harry Philips disagreed, saying a bid for the materials science company – 4.7p worse off at 436.9 – "very unlikely".

Mitchells & Butlers eased back 2.5p to 244p after the Harvester owner announced it had received no other approaches, other than the one from major shareholder Joe Lewis' Piedmont investment vehicle. Analysts from Evolution were telling investors in the pubs company to stay strong, urging them to hold out for more than the 230p a share the Tottenham Hotspur owner has said he may offer.

Down on the Alternative Investment Market, Hightex – which has worked on Wimbledon's Centre Court as well as the Soccer City Stadium in Johannesburg – plummeted by 40.91 per cent to 1.62p after admitting it would see a €1.3m operating loss for the first half of the year.