Market Report: May Gurney cleans up in bidding battle

  • @LauraHChesters

Never have binmen been so in demand in the City. A £221m knockout offer in the bidding battle for the maintenance, waste and recycling supplier May Gurney Integrated Services saw punters pile in.

The construction group Kier is now the front-runner and has outbid rival Costain with a 315p-a-share bid. The offer has been recommended, and the price is at a 71 per cent premium to May Gurney's closing price on 25 March, when it announced its proposed £380m all-share merger with Costain, and a 35 per cent premium to Costain's bid. May Gurney cleaned up with a rise of 46.5p, or 18 per cent, to 299.5p on news of the deal.

Kier plans to fund the deal with a mixture of cash and new shares.

Analysts at Oriel Securities like the sound of the deal for Kier, and rate the group a buy with a 1,524p price target. Kier lost 66p to 1,199p. Analysts at Liberum Capital said Costain could not "justify the same level of synergies" and is thought to be unlikely to make a new bid. It lost 4p to 278.5p.

Tuesday was the blue chips' best day in nearly four months, and the FTSE 100 collected another 25.64 points to 6,431.76. A poor German IFO business sentiment survey fuelled further speculation that a rate cut from the European Central Bank is on the cards in Europe, helping London and European stocks up.

Traders were on notice in London to be wary of reacting to unsubstantiated news after a hacked Twitter account at the news agency AP on Tuesday sent out false claims of two explosions at the White House. Wall Street panicked and the Dow plunged briefly.

Hugh Taggart of the news analytics service RavenPack said: "We have been warning clients on the dangers of using sources like Twitter in isolation for detecting and trading on individual events."

Banks were in focus again as Barclays, down 3.75p to 294.55p, reported a 25 per cent pre-tax profit drop for its first quarter, while Lloyds Banking Group's plan to sell 632 branches to Co-op collapsed. Lloyds, up 0.87p to 51.95p, will float the branches as TSB separately on the stock market.

Over on the mid-tier index, the paper and plastic-packaging specialist DS Smith said it expects to deliver operating profit "fully in line with expectations", and its shares packed in a 17.3p gain to 233p – the day's top riser.

There were more "in line with expectations" updates for the publishers Reed Elsevier and UBM, but their shares were static at 778.5p and up 4p to 690p respectively.

The set-top box maker Pace said its first-half sales will be up, and it produced a 7p gain to 239p.

Computacenter, one of the UK's biggest IT groups, issued a profit warning, blaming troubles in Europe, and it crashed 67.9p to 470.1p.

The Jordan-based drug company Hikma Pharmaceuticals was the target of gossips speculating that the company could be the subject of a takeover. The group had recently called off the sale of its vaccines arm. It was 19p better off to 994p.

The catalogue and online plus-size clothing specialist N Brown closed up 26.6p to 446.7p after reporting profits up 2.6 per cent to £96.4m in the year to 2 March. Its sales rose 6 per cent to £784.7m, with online revenue accounting for more than half.

Over on Aim, the biotech expert Summit Corporation reported on encouraging early results from a clinical trial of antibiotics for the hospital bug C.difficile. The stock was 0.3p healthier at 4.8p.

The video search engine business Blinkx, which features viral videos such as the Chinese reporter who recently ran out of her wedding to cover the Ya'an earthquake, said its sales and profits will be ahead of expectations. It produced a 15.5p rise to 93p. It said trading in the second half of the year continued to be strong and expects to be ahead of targets, with sales for the full year of about $196m (£128m), up from a range of $180m to $185m. Jonathan Imlah, an analyst at Canaccord Genuity, said: "The shares should go materially stronger on this positive update and regain much recent lost ground."

The oil and gas group Range Resources plans to merge with International Petroleum, but it slipped 1.1p to 3.34p.