Market Report: Man tops the FTSE 100 as bid talk dominates again

  • @MrNickClark

For a second day, the takeover talk was going gangbusters, with rumours in at least four major UK-listed companies doing the rounds. Top of the blue chips at the end of the session was the world's largest listed hedge fund, Man Group. The group rose 12.5p to 229p predominantly after broker Numis raised its recommendation from "reduce" to "buy" a day after it shareholders approved the acquisition of rival GLG. Some gossips in the market were also reheating talk Man itself could be a target. Two months ago, the chat was of potential suitors including Goldman Sachs, although there has been little evidence to support it.

A late flurry of gossip the previous evening had seen takeover rumours swirling around Autonomy and yesterday they really took hold. The IT group was close behind Man, rising more than 5 per cent. The shares were up 85p to 1,716p as the trading floors buzzed with speculation US giants Microsoft or Oracle could be keen. One trader said yesterday: "It feels like people are picking these stocks at random to get things going in the market".

Another strong performance came from the defence company BAE Systems. The group revealed after the market closed on Wednesday it had won a contract worth $629m to upgrade 1,700 Caiman mine-resistant ambush-protected vehicles, which it first sold to the US military earlier this year. Investec yesterday recommended buying the stock, saying that its price of 6.8 times full-year earnings in 2011 "seems to be discounting an overly bearish outlook", adding the market "appears to be overlooking BAE as a solid global business with secure earnings". The shares rose 11.3p to 313.3p. The FTSE 100 was lacklustre as traders struggled for direction. It ended the day up 4.6 points at 5,371.

Just to buck the trend Panmure Gordon poured cold water on takeover talk in Arm Holdings. The stock had soared last week, but analyst Nick James said the chances of a sale were "extremely low given both strategic and valuation considerations". Panmure reiterated its "sell" rating and cut the target price from 275p to 265p. Mr James said: "While Arm is well exposed to multiple structural growth drivers, it is still also exposed to a weakening macro picture." The note pointed to Intel's warning last week that third quarter revenue would be about 5 per cent below the midpoint of its guidance range. Arm finished near the foot of the top tier, giving up 14.1p to close at 360p.

A note from Citi put precious metals under pressure. Analyst Jon Bergtheil said the precious commodities had outperformed base metals since the beginning of 2007, with gold the biggest beneficiary. Yet, he believes the forecast period of slow economic growth, with less systemic risk, "suggests there will once more be a level playing field between base metals and precious commodities". The only gold stocks likely to thrive are those with good production growth, he said, downgrading African Barrick Gold and Hochschild Mining, citing "limited three-year production growth". The former gave up 6p to close at 611.5p, with its mid tier counterpart falling 9.1p to 362.5p.

The lights were going out at Scottish & Southern Energy, named as one of four facing a regulatory probe over potential mis-selling. The utility company gave up 16p to close at 1,155p as Ofgem said it could face heavy fines alongside EDF Energy, npower and ScottishPower. Elsewhere in the utility sector another stock was bolstered by, yes, bid speculation. The talk of a 760p per share bid hardly caught on as United Utilities ended up 5.5p at 587.5p.

On the second string, Go-Ahead Group was steaming after investors backed its full-year results. The 77p rise to 1,165p came despite the group posting a 24 per cent drop in full-year profits as sales fell at its rail group, and an uncertain outlook for the next year because of potential government spending cuts. The group's results did beat expectations and it also announced the sale of its Meteor business for £11m.

One stellar performer on the FTSE 250 was Yell Group, the debt-laden directories business. The stock rose 15 per cent at one stage, following yet more bid talk although details were sketchy. It closed up 2p to 17.79p.

Yell was overtaken at the close by McBride. The group, which makes own-brand products for supermarkets, had suffered a tumble in June when it warned that its costs were set to rise. The analysts were backing the stock again yesterday as management was much more upbeat sending the shares up 19p to 160p.

On the downside Britvic had lost its effervescence as Credit Suisse downgraded the stock from "outperform" to "neutral" and cut the price target from 530p to 510p. The shares retreated 5.1p to 471.4p following the news.

On the growth market, Havelock Europa was up 20 per cent as it found a new chief executive. The company, which describes itself as a "retail and educational interiors and point of sale printing group" has hired Eric Prescott, former managing director of Balfour Beatty Rail infrastructure services. The shares rose 1.5p to 9p.

Also on Aim, Stanley Gibbons Group, the stamps group yesterday announced the £300,000 takeover of assets from specialist stamp dealer Nigel Haworth. The group said the deal would be financed out of the its cash balances. The shares rose 0.5p to 134p.