Market Report: Panmure warning kills off hope of JLT takeover

  • @greentoby

Yesterday's dramatic rally may have prompted the re-emergence of some familiar bid stories in the insurance sector, but investors in Jardine Lloyd Thompson (JLT) were told to wave goodbye to their hopes of a takeover. The insurance broker suffered a blow when Panmure Gordon instructed punters to bail out, warning that its current share price could be as good as it gets.

The mid-tier group has been on a steady rise since its major shareholder, Jardine Matheson (JM), announced last month that it wanted to increase its stake to more than 40 per cent, with the Asian-based conglomerate offering 765p a share. Yet Panmure's analyst Barrie Cornes said that with JLT now almost at this level, it would "act as a ceiling rather than a floor for the share price for some time to come", and he downgraded his advice to "sell".

For years the group has been the subject of regular rumours that a pretador could be circling, but Mr Cornes added that JM's move "effectively rules out any bid speculation".

In response, the group failed to match the strong rises seen elsewhere on the mid-tier index, easing up a modest 19p to 760.5p. Some optimistic City voices were suggesting there was still a chance JM could try to buy the rest of the company at some point, although others said this would be against its strategy.

Takeover chatter was rather more noisy around Aviva and Prudential, with the blue-chip insurers helped by the revival of vague – and rather familiar – bid speculation. Zurich Financial was once again rumoured to be interested in the former, while there was talk of a possible move for Prudential from Hong Kong.

The two companies ended up climbing 8.84 per cent to 375.5p and 6.49 per cent to 681p respectively, despite dealers rubbishing the reheated whispers. Instead, they put the move down to the general jump in the markets following the overnight decisions reached by European leaders in Brussels.

Although there was a general consensus on trading desks that the agreement left plenty of questions unanswered, that did not stop the FTSE 100 joining markets across the continent in rocketing.

Strong GDP figures from the US helped the benchmark index on its steady climb, and although there was a slight pullback at the end, the index eventually closed 160.58 points ahead at 5,713.82 – its highest for over 12 weeks.

Although many were expecting it anyway, the confirmation that the UK banks would not be forced to raise fresh capital prompted Barclays to add 17.58 per cent, rising 31.4p to 210p, while Royal Bank of Scotland advanced 10.05 per cent to 27.27p.

The analysts at Credit Suisse clearly picked the wrong day to cut their estimates for Lloyds: despite slashing its target price to 31p from 40p and predicting "weak" third-quarter figures, the bank, which is part-owned by taxpayers, still shot up 8.23 per cent to 37.07p.

Reassuring comments over commodity prices boosted the heavyweight miners. Kazakhmys (which was lifted 87p to 1,016p) revealed that the appetite for copper had remained steady. And the asset management giant BlackRock was quoted as saying it believed that demand from China would soon recover once the country loosens its monetary policy.

Xstrata, meanwhile, powered up 108p to 1,111p, despite Liberum Capital warning that its recent rally had lessened the likelihood of a merger with its sister company Glencore, which finished 40.15p stronger at 443.9p. The broker said that the gap between the two groups' markets had narrowed, meaning that the "terms of an all-share deal would likely look far less compelling".

Down on the FTSE 250, SDL was one of a handful left in the red. After the translation software company's recent 80p-a-share approach for Alterian was rejected, traders said there were fears it could now be working on a higher offer.

The group dipped 5p to 640p, while investors in its prey seemed confident it was worth more than the original offer, with the marketing technology provider increasing 3p to 83p on the small-cap index.

Drax was the subject of bid talk as it increased by 10.5p to 529p. The power station operator received a boost last week from the announcement of new proposed subsidies for biomass, which also led Goldman Sachs' Andrew Mead yesterday to say that the group's "strategic attraction [to a potential acquirer] is stronger".

A deal with the Chinese street lighting manufacturer Shanghai Yaming meant the tech group Cyan was shining on AIM, with the tiddler charging up 37.36 per cent to 0.62p.

Elsewhere, the return of vague takeover rumours boosted Cove Energy, as the explorer, which has operations in Mozambique, was driven up 4p to 91.25p.