Market Report: Investors spot recipe for takeover at Tate & Lyle

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The Independent Online

A tasty takeover tale prompted investors to rediscover their appetite for Tate & Lyle last night, helping the food ingredients group to the top of the mid-tier index and its highest share price since 2007.

The company powered up 31p to 651.5p on the back of vague speculation that a number of groups could be mulling over a potential bid worth between 820p and 850p a share.

The commodities group Archer Daniels Midland was one of the names in the frame, the US giant having been linked with a move in similar talk earlier in the year. The sugar trader Bunge was also being discussed as a possible aggressor.

However, market voices played down the mutterings, instead putting Tate's rise down to positive sentiment around the company following the release last week of its full-year figures. The update prompted Deutsche Bank, which described the results as "impressive", to raise its price target yesterday by 60p to 785p and reiterate its "buy" recommendation.

The broker's analysts also welcomed Tate's plans to reopen its sucralose plant in the US as "great news", adding that "this decision alone could drive mid-single-digit profit growth... for years to come".

The FTSE 100 never looked like stretching its winning run to a sixth session, and a further late fall meant by the bell it had dropped 61.38 points to 5,928.61. Disappointing manufacturing data from the UK hurt investors' confidence, while poor employment figures from the US did not help.

The index was also being weighed down by a number of stocks trading ex-dividend, and National Grid and Marks & Spencer were among those losing their payout attraction, sliding 30p to 596p and 12.5p to 386.4p respectively.

Glencore International was among the major fallers, slipping back 17.2p to 513.9p in the wake of the European Investment Bank's decision to stop new loans to the commodities trader. Elsewhere, BHP Billiton – which was linked in speculation to a possible bid for Ferrexpo, down 4.8p to 452.8p, earlier in the week – edged back 11p to 2,392p as vague rumours spread that it could be interested instead in the US miner Cliffs Natural Resources.

Morgan Stanley's prediction that house prices will drop 10 per cent by the end of next year contributed to Lloyds Banking Group's dip of 1.99p to 50.01p, as the broker's analysts said the bank would be the worst hit given that mortgages make up nearly 60 per cent of its loan book.

The session's top performer was G4S, advancing 5.1p to 291p after Espirito Santo's first look at the security services company convinced the broker to recommend it as a "buy".

Also in the blue was Burberry, the luxury retailer shifting forwards 7p to 1,326p as Numis Securities reiterated its "add" advice in the wake of last week's preliminary results.

A slump of 26.1p to 312p left AZ Electronic Materials at the foot of the FTSE 250 as the chemicals group lost all the gains, and more, that it made on Tuesday following its addition to the MSCI Global Small Cap Indices. The retreat of nearly 8 per cent was prompted by the news that its private equity investors Carlyle Group and Vestar Capital Partners were disposing of 80 million shares at 302p a pop, representing more than a fifth of the company.

Its final results may have beaten profit expectations, but Northumbrian Water still fell 3.8p to 358.9p as its bid hopes were dampened. Following the release of the figures, Evolution Securities' Lakis Athanasiou cut his recommendation to "reduce", saying he gave "little credence" to the recent takeover chatter.

Speculation has focused on the utility's 27 per cent-stakeholder Ontario Teachers' Pension Plan, but Mr Athanasiou claimed there was "nothing [the Canadian consortium] can do as 100 per cent owners to add value"; he also pointed out that "additional water sector exposure can be achieved more cheaply by buying stakes in other listed companies." Investec's Angelos Anastasiou did not help; the analyst said a bid was "a possibility, but not a probability" and that he would "be tempted to take profits".

De La Rue was also suffering from fading takeover expectations, after the French group Oberthur, which had an approach rejected earlier in the year, announced it would not make another attempt, pushing the bank note printer back 24p to 798p.

Back on the blue-chip index, Wolseley closed 37p behind at 2,021p after its third-quarter results. The builders' merchants has been helped recently by reports that it was considering selling three of its units, but the lack of any comment on disposals disappointed investors, despite its underlying operating profit for the period rising by £30m to £131m.

Down on the Alternative Investment Market, Ceres Power rocketed 10p to 34p after the alternative energy group announced that it had achieved a breakthrough in resolving a problem with its fuel cell boiler.

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