Market Report: JJB jumps on fitness-club acquisition talk

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The Independent Online

JJB Sports, the sports retailer which said earlier this week that it was axing 800 jobs and closing 72 of stores, gained more than 6 per cent yesterday after market rumours suggested that a buyer had emerged for its fitness club business.

The bidder remains unknown, but the speculation suggested that a formal announcement would be forthcoming "soon". A rival rumour, however, told a different story: there was talk of a bid for the embattled retailer, which traders dismissed as errant chatter ahead of the weekend.

JJB closed at 123.75p, up 6.45 per cent, or 7.5p.

Vague bid talk was evident around Carphone Warehouse, which gained 8p to 251.5p. The rumours appeared late in the day and suggested that the group was about to be subject to a 400p-per-share bid next week. The chatter bore no clues about the bidder's identity, but past speculation has pointed to interest from the US retailer Best Buy.

Overall, the FTSE 100 was up 76.1, or 1.3 per cent, to 6,056.5. The London benchmark was cheered by early gains on Wall Street. The FTSE 250 was also firm, gaining 151.7, or 1.5 per cent, to 10,241.1. The banking sector was resilient. Shares stood firm as Citigroup said it had made a loss of $5.1bn (£2.56bn) in the first quarter and press reports suggested Royal Bank of Scotland was close to announcing a rights issue.

"I think investors are pleased that the big banks are opening up and telling us about their losses," said one trader. "RBS has been talked about for sometime as well," he added. RBS gained 18p to 384p, Alliance & Leicester added 23p to 533p, Barclays rose by 17.25p to 496p and HBOS was up 8p at 558p.

Other financial stocks, including Schroders, which gained 57p to 1,066p, Old Mutual, which added 3.70p to 124.70p, and Prudential, which was up 27.50p at 702p, were also strong.

The market rally was a boon for house builders as they remained firm despite fresh, gloomy forecasts for the UK housing market. "The update from Taylor Wimpey, combined with other industry discussions, has confirmed the housing market has dropped alarmingly in recent weeks," said Citigroup, to little effect.

UBS also weighed in, noting that the "rate of deterioration in the UK housing market is still accelerating," and adding: "Short of significant intervention by the [Government or the Bank of England], we believe that FY08 is going to see significantly depressed new housing starts and declining selling prices. We see no early recovery." The bearish assessment notwithstanding, Persimmon gained 28.50p to 687.50p as investors picked up bargains after recent losses. Redrow added 9.25p to 290p, Barratt Developments rose to 370.75p, up 12.25p, and Taylor Wimpey gained 0.25p to 159p.

Bargain hunters also gave a boost to the retail sector, which suffered heavy losses earlier in the week. B&Q-owner Kingfisher was up 6.40p to 129.50p while Next added 42p to 1,145p. Debenhams gained 3p to 63.50p.

On the FTSE 250, Greene King was up 20.50p to 570.50p after Goldman Sachs included the stock in its pan-Europe "conviction buy" list. The broker said: "We see three main catalysts for improved performance: 1) we expect Greene King's upcoming trading statement to reassure that the company is not seeing worse trading than peers; 2) the share price is clearly sensitive to [like-for-like] sales which we expect to improve as the anniversary of the smoking ban is passed in July; and 3) if pubs are REIT-able, we believe it will have positive implications for valuations in general."

Expro International, the UK-based oil services firm, was the focus of yet more bid activity.

Throughout the morning, the market waited for a counter-bidder to emerge, to challenge the recommended offer for the company from a Candover Partners-led consortium. Chatter suggested that instead of KKR, the American private equity firm, or French peer Technip, Halliburton was the likely bidder. The North American oil services giant, it was said, was close to mounting a formal challenge to the 1,435p put on the table by the Candover-led consortium. And late in the afternoon, as the rumours kept the stock buoyant, official confirmation was finally forthcoming – Halliburton said it was conducting due diligence on Expro and that if it made an offer, it would be in cash and at a premium to the Candover offer. Expro closed at 1,510p, up 65p.

On AIM, biodiesel producer D1 Oils weakened after Goldman Sachs cut its target price for the stock to 100p from 155p. "Recent company developments [including a loss for 2007 which was much higher than we expected, an effective downgrade of the company's current plantation footprint – by 50,000 hectares – and a reduction of expected yields from its planning areas and a share issue at a 34 per cent discount to its trading price] have all been disappointing," the broker said, sending the stock down by 2p to 35.5p.