Market Report: Investors resigned to a one-horse race for Logica

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The Independent Online

Those praying for the emergence of a rival admirer to fight for Logica's affections are losing heart. Last week's news that the software group had agreed to be snapped up by Canada's CGI prompted hopes of a bidding war, but investors are getting increasingly resigned to the prospect of it being a one-horse race.

While the wider market returned from the long weekend with a bang, Logica was left behind, dipping 3p to 107p. Initially the announcement of the deal had seen its share price shoot up nearly 70 per cent in one session, moving it well above the 105p-a-share CGI is forking out.

However, ever since it has been moving back towards the offer price with City voices doing their best to dampen hopes of a new approach.

One of those playing the party pooper was Investec's Julian Yates, who said that while "a counter bid cannot be fully ruled out, on balance we see it as unlikely."

Logica's structural problems plus "the heavy restructuring price tag that would likely be needed" meant a successful rival approach would be "expensive", claimed Mr Yates. He did cast his eye over a number of potential bidders – including BT (up 0.8p to 204p), Accenture and IBM – but concluded that for most of them there were "more reasons against than for".

Similarly downbeat are the analysts from UBS. They have removed their "buy" recommendation on Logica, saying CGI's offer is "most likely to succeed" while calculating that the chance of a rival offer emerging was between just 10 and 15 per cent.

Having finished last week at its lowest for six months, the FTSE 100 shot up 123.92 points to 5,384.11. While there was no rate cut from the European Central Bank, traders were getting ready to pore over US Fed chairman Ben Bernanke's testimony to Congress today for any hints regarding the possibility of another round of quantitative easing in the States.

The commodity stocks were helped by surprisingly strong GDP figures from Australia overnight. Meanwhile, the banks rallied with Barclays and Lloyds up 14.3p to 187.8p and 1.33p to 27.05p.

Royal Bank of Scotland saw a rather dramatic change, with the state-owned bank finishing at 213.2p despite having ended last week at 19.9p a share. Such a move would total more than 950 per cent, which would result in the Treasury banking close to £150bn in a profit on its 82 per cent stake.

However, George Osborne shouldn't get too excited yet as the jump was the result of a share consolidation that meant every 10 shares were replaced by a single "new" one, with the state-owned bank actually only advancing 13.3p.

Normally touted as a potential bid target, drugs maker Shire was the subject of vague rumours it could be considering a possible move for US pharma group BioMarin. However, Shire rubbished the speculation as it was lifted 95p to 1,879p.

There were just four blue-chip fallers, including Tate & Lyle (10.5p lower at 643p). The sweeteners maker was left with a rather sour taste in its mouth after broker Berenberg slashed its forecasts.

Following the bell it was confirmed that Man Group is dropping down to the FTSE 250 at the end of next week. The hedge fund giant had actually moved 5.35p higher to 80.85p with Citigroup upgrading its rating to "buy", but as expected defence services firm Babcock International (13p stronger at 853.5p) will take its place.

Elsewhere on the mid-tier index, Premier Oil and Cairn Energy climbed 24.2p to 353.2p and 13.8p to 289.7p following the announcement that their Carnaby well had discovered good-quality oil. Their Aim-listed partner, Nautical Petroleum, spurted up 10.25p to 271p.

It was a tough session for the retailers, including Home Retail. The owner of the struggling Argos chain retreated 2p to 71.5p despite the news that fund manager Silchester International Investors has raised its stake to above 8 per cent.

Troubled Yell Group shifted up 0.09p to 1.67p after Citigroup removed its "sell" advice following the Yellow Pages-owner having plummeted roughly 85 per cent in less than year. However, the broker warned that the "outlook... remains uninspiring" and refused to set a target price for the small-cap penny stock, saying there was "insufficient valuation basis" to do so.

Shares in TEG stank up the Square Mile after it revealed its sale process had ended without a takeover being agreed. The composting firm's share price was nearly cut in half as it slumped 3.5p to 3.75p on Aim, with investors also hit by the announcement of an open offer to raise up to £2m.