Market Report: Premier Oil finds itself in the takeover spotlight

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The Independent Online

The takeover credentials of Premier Oil were given a boost yesterday as the British oil and gas explorer was labelled an "obvious merger and acquisition (M&A) candidate".

The group, which is a favourite among markets gossips, has been previously linked with a number of companies, which – according to UBS – is likely to continue.

The broker's analyst Melanie Savage said she believes Premier is "a particularly attractive M&A target" compared with the rest of the European exploration and production groups, largely because of its "rapidly growing production profile".

Premier, which was among the risers on the mid-tier index after jumping 23p to 2,011p, "offers a potential bidder the best value per producing barrel [in the sector]," said Ms Savage.

Reiterating her "buy" advice on the company, she also kept its target price of 2,440p but said her "'blue-sky' valuation ... is 4951p, taking into account unrisked upside on [its] current drilling programme plus 658p of further upside that we do not yet value in the company's Red Sea block in Egypt".

Speculating that a state-owned group from the Middle East could be tempted to make a bid for Premier, she was not so keen on the attractiveness of Soco International. The analyst played down recent speculation that the group – which was 3.2p higher at 370p – could soon receive an approach, saying she sees "no logic in a buyer paying a significant bid premium" for the company given it "offers no de-risked exploration".

Overall, the FTSE 100 rebounded following Thursday's large fall, yet it failed to return above the 6,000 point level after it added 28.34 to close at 5,896.25.

Autonomy was lifted up 56p to 1,480p, leaving it as one of the top tier index's biggest movers. The software company announced it had won two further contracts, one with the telecoms group Verizon and the other with an unnamed law firm in the States, bringing its total announced over the week to six.

Hopes were raised that Royal Bank of Scotland will manage an earlier than expected departure from the Asset Protection Agency set-up by the Government after reports that it was considering such a move. The bank was pushed up 2.75p to 44.94p, taking the top spot as it was given a boost by Morgan Stanley picking it as a better value investment than Lloyds Banking Group, which rose 0.56p to 67.37p.

Positivity over the future of AstraZeneca's blood-thinning product Brilinta helped the pharmaceuticals company move 41p forwards to 2,963.5p. The Food and Drug Administration was expected to approve the drug last month but instead asked for more information, which the group has now provided.

In the early hours of trading it looked as if National Grid was going to be left back among the fallers, yet a rally saw it post a small increase of 3p to close at 542p. The utility company made the move despite disappointing news from the States, with New York authorities refusing its request to up its electricity rates by over $390m (£243.7m).

Instead it has only been able to implement a rise of $112.7m, with Investec's Angelos Anastasiou saying that although the decision "was pretty much as expected... we do not believe that the repercussions of this outcome are fully reflected in [its] share price".

Burberry missed out on the top tier index's resurgence, as it was knocked back 14p to 1,031p even though Goldman Sachs upped its target price and rival retailer Mulberry said its profits for the year would beat forecasts.

Its announcement was the latest in a long run of positive updates coming from the luxury goods sector, and the handbag maker was lifted up 55p to 1,305p on the Alternative Investment Market.

A fresh oil find at a well in the North Sea bumped up its co-owners Enquest and Valiant Petroleum, leaving the former near the summit of the FTSE 250 after a climb of 8.3p to 145.5p. On the AIM, Valiant saw an even larger gain, finishing 72.5p stronger at 672p.

Cable & Wireless Worldwide was 2.8p better off at 69.9p as market gossips got excited over speculation that the business telecoms company could be about to receive an approach.

Meanwhile, there were also rumours doing the rounds about Premier Foods, which moved 1.6p higher to 22.35p – its highest price since June last year. The group, which owns a number of brands including Bisto and Batchelors, made the surge to the top of the mid-tier index as talk spread that it had completed the sale of its Quorn range.

Mouchel added 22.75p to close on 136.5p after its fellow small-cap company Costain upped its bid for the outsourcer yet again. The construction group – which dropped 3.5p to 219.25p – increased its bid for the third time with a new proposed deal worth £170m, although it now has competition as Mouchel revealed it had received other approaches.

Petra Diamonds announced it had bought the Finsch mine in South Africa from De Beers for $210m, prompting it up 18p to 180p on the AIM.

FTSE 100 Risers

Weir 1,653p (up 36p, 2.23 per cent)

Among the blue-chip index's biggest risers as Goldman Sachs upgrades its advice to "buy".

African Barrick Gold 529p (up 11p, 2.12 per cent)

Yellow metal miner finally manages to gain after six sessions of falls.

BAE Systems 349.6p (up 6.4p, 1.86 per cent)

Announces that it has struck a $86m agreement to purchase US group Fairchild Imaging.

FTSE 100 Fallers

Man 282p (down 12.1p, 4.11 per cent)

Continues to drop in the wake of Thursday's interim management statement.

BT 174.6p (down 2p, 1.13 per cent)

Among the day's major fallers, as UBS keeps its "neutral" recommendation on the stock.

Severn Trent 1,401p (down 10p, 0.71 per cent)

Share price retreats ahead of its next update, which is set to be released next week.

FTSE 250 Risers

St James's Place 293p (up 12p, 4.27 per cent)

Still moving forwards after it said on Thursday that new business in 2010 had risen more than 30 per cent.

Rentokil Initial 102.5p (up 0.9p, 0.89 per cent)

Slight gain as a result of Panmure Gordon increasing its target price from 96p to 108p.

Tate & Lyle 555p (up 3p, 0.54 per cent)

No significant move despite continued, if vague, speculation of a takeover.

FTSE 250 Fallers

PZ Cussons 370p (down 6p, 1.6 per cent)

Suffers slight decline as investors prepare for next week's interim announcement.

Spirent Communications 479p (down 3.5p, 0.73 per cent)

One of Thursday's biggest gainers finds itself at the opposite end of the index.

Elementis 124.1p (down 0.9p, 0.72 per cent)

Chemical producer experiences third consecutive day of falling.