Market Report: Investors looking forward to Smiths Group break up

A break-up of Smiths Group? It is worth betting on, one broker was telling its clients yesterday. In fact, Smiths is one of the most desirable stocks on the FTSE 100, and its shareholders can expect to benefit from the wave of mergers and acquisition activity that will soon crash over this particular industrial behemoth.

UBS is the broker recommending the purchase. It added Smiths to its "most preferred Alpha Preference portfolio" yesterday, saying it was "back on the radar". It slapped a price target of £14 on the shares, which would give new buyers a clear profit of more than £2.50.

Chief executive Phillip Bowman is currently carrying out a restructuring of the group, and the UBS analyst Avi Hoddes's take is that, after its completion, "Smiths will ultimately be broken up". The analyst added: "This despite low single-digit organic revenue growth across the group. Recent data points indicate that general M&A activity has picked up." UBS forecast full-year revenues of £2.7bn when Smiths reports its numbers next month, with pre-tax profits at £417m, and it predicted upgrades to City forecasts after the results. The shares ended the day rising 24p to 1148p.

There was little else in the way of positive news to excite the market, and there was evidence of investors heading for the defensive stocks yesterday, frightened over the economic outlook. The big pharmaceutical giants were particular beneficiaries, with GlaxoSmithKline closing the highest of all, up 25p at 1,177p.

The only real chatter surrounded Cairn Energy as rumours of an approach for the oil group swept the market in the morning. Tongues were wagging over potential suitors, with favourites including Italy's ENI as well as the UK's own Royal Dutch Shell. The talk of a potential 700p per share approach from a "cash-rich" oil giant did send Cairn's shares to the top of the blue chips in the morning yesterday. It retreated during the day, eventually falling into the red, 1p down at 460p, as traders poured cold water on the rumours. Cairn was handed approval to drill in Greenland in June, where some have predicted a fifth of the world's undiscovered oil and gas reserves lie. One trader said: "It would be a real surprise if either side jumps before the results from Greenland come in; it could change the entire company. At the moment its India operation is supporting the group."

As the summer continued to drag on the trading floors of the City, and the US market opened sharply lower, the FTSE 100 retreated 34.1 points to 5376.4. The previous day's strength in the mining sector evaporated, with Vedanta Resources the worst, as the price of metals slipped, linked to expectations of poor Chinese inflation figures due out this week. It closed down 103p at 2,408p.

Worst blue chip of the day was Tui Travel, after its results were badly received. The travel agency group plunged as much as 10 per cent at one stage after a profit warning. The shares closed down 22.5p at 203.1p, a 20-month low. KBC Peel Hunt said "even where there is good volume news, the margin picture has deteriorated".

Intercontinental Hotels put out rather more positive numbers, yet the stock also tumbled. Some speculated that a note from Bank of America Merrill Lynch hit the stock. The broker kept its "underperform" rating, citing uncertainty on how the macroeconomic conditions would affect the group for the rest of the year. Intercontinental closed down 1,078p at 46p.

Another of the larger fallers was also a victim of the brokers. Invensys, a UK engineering company, dropped 9p to 260p as Goldman Sachs cut its price target from 369p to 351p. The vampire squid cut its forecasts to account for lower profits expected in the rail business, as revealed in Invensys's interims last month.

The housing stocks took a hammering on the second string, with Redrow the worst on the day. The group gave up 8.8p to close at 118p, retreating after four consecutive session rises. It was followed closely by Barratt Developments, which dipped 5.8p to 101.4p. But there was finally some respite for the social housing group Connaught. After giving up nearly a third of its value the day before, the stock rebounded 2.4p, 21.8 per cent, to 13.2p – although it left many scratching their heads over whether there really was optimism in its negotiations with the banks, or it was just a bear squeeze.

On Aim, Scotgold Resources nosedived 26 per cent. The shares were suspended in the morning after the executive director of planning and rural development for the Loch Lomond and Trossachs National Park called for a block on the mine it was planning. The final approval vote takes place next week and the company can appeal to the Scottish government if it goes against them. The shares resumed trading to close at 3.5p. Down among the small caps was logistics software group Kewill as it revealed that talks over a potential takeover "have not progressed to an acceptable offer and have now been terminated". The shares sunk to pre-talk levels, down 15.25p at 101p.

On the upside, Tissue Regenix was up 3.45 per cent as it received European approval for a vascular patch, which is designed to be permanently inserted into the body. The tissue replacements developer rose 0.5p to 15p.

Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
filmBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
Arts and Entertainment
arts + ents
ebookA unique anthology of reporting and analysis of a crucial period of history
Morrissey pictured in 2013
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features playground gun massacre
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
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

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices