Market Report: Invensys on right track with rail deal

A deal with German industrial giant Siemens expressed Invensys shares to the top of the mid-cap index yesterday. The UK engineer has agreed to sell its rail business in a £1.74bn deal which will see it receive £400m in an upfront payment. It has proposed to return £625m of cash to shareholders and has agreed a deal to address some of its pension deficit issues.

In response, shares in Invensys - which has long been rumoured as a potential takeover target - travelled up 59.7p to 280p.

Traders with a desire for takeover action were busy rehashing rumours that there is private equity interest in retailers again.

British luxury brand Burberry sashayed to the top spot on the benchmark index, up 34p to 1,274p. The stock has risen in four of the past five days and some dealers hoped a private-equity bid could come in as high as 2,000p. But many dismissed the rumours as old and unfounded.

Retailer Marks & Spencer was also back in fashion, up 8.3p to 387p, as it agreed a 10-year funding plan with its pension scheme trustees which will cost it £60m a year less than before. The news stoked bored traders who hoped it could mean a takeover approach could be more likely now the pension problem is in better shape. They think chief executive Marc Bolland could be willing to entertain the idea.

Water and sewage services group United Utilities' shares gushed up 117.5p to 686.5p after it said higher prices helped it report sales of £823m in its first half.

Analysts at Citigroup cut their share price target for packaging and distribution group Bunzl to 1,190p and it fell to the bottom of the blue-chip index, off 43p to 1,031p.

Fears of the looming United States fiscal cliff sent the FTSE 100 index down in early trade but it recovered at the end of the day to close up 3.57 points at 5803.28. Concerns that China's growth is drastically slowing down were scotched by ministers yesterday who said the world's second-biggest economy is certain to hit official growth targets this year. Commerce minister Chen Deming said the country would meet its 7.5 per cent annual growth target "for certain".

Microchip maker ARM Holdings got an upgrade from analysts at Barclays who gave it a share price target of 820p, rating it overweight, and its shares ticked up 14.5p to 772.5p. City rumours also claim that the group could be in talks with US tech giant Intel. Cambridge-based colleague, mid-cap microchip designer, CSR got a buy rating from Liberum Capital scribes ahead of its $285m (£178m) tender offer today. Investors get the windfall after CSR sold its mobile technology division to Samsung in the summer. Liberum expects the payout to be in the 335p-375p range and a price will be announced on Friday. Its shares computed a 2.6p rise to 365.6p.

Insurer Lancashire Holdings went ex-dividend yesterday and was slapped with a downgrade from analysts at JPMorgan. They rate it overweight and gave it a share price target of 860p. Its shares declined 57.5p to 796p.

Fellow faller on the mid-cap index, miner Kenmare Resources, got the wooden spoon when it lost 2.56p to 30.9p after it warned production issues meant its full-year output will be up to 10 per cent lower than forecast.

Thomas Cook boss Harriet Green revealed a massive £590m loss at the travel agent but vowed to turn things around and put her money where her mouth is by spending £115,000 buying half a million shares at 23p. It booked a 1p gain to 25p.

AIM miner Noventa said problems at its Marropino mine had meant it had not completed any sales during the second half but said it is "making progress on these matters" and "deliveries will recommence in December 2012". Its shares dug down 2.66p to 3.47p.

Oil explorer Leyshon Resources last week saw its shares suspended on AIM a day after they had already been suspended on the Australian index. At the time, the shares jumped 60 per cent. Trading was restored yesterday and they slumped 26 per cent, 6.62p to 18.88p.

AIM entrepreneur David Lenigas is back in the news, this time with Rare Earth Minerals, where he is a director. The minerals and metals investor has raised £402,000 in a placing to investors of 670 million new shares of 0.01p each in the company at 0.06p per share. Its shares stood at 0.06p.