Market Report: Takeover talk raised hopes that there could be a wave of M&A activity

Takeover talk gripped the City yesterday, with blockbuster tie-ups in the pharmaceutical industry raising hopes that a wave of merger and acquisition activity could finally be getting under way.

Potential targets were trading at a premium, with BG Group most in demand, up 34.5p at 1180.5p. The surprise exit of the oil and gas producer's chief executive Chris Finlayson earlier in the week has left it vulnerable to a potential bid in the eyes of investors.

Ophir Energy, up 9.8p at 251.2p, and Premier Oil, 7.8p higher at 337.2p, were also on the move after recently cancelling merger plans. Both now look attractive buys.

And businesses long tipped as takeover targets were on the up. Sainsbury's put on 2.7p to 333,2p, Cable & Wireless added 1.9p to 53.4p while Tullow Oil rose 15p to 865.5p.

AstraZeneca, one of the few companies actually in play, bucked the trend: traders decided they had overreacted to Pfizer's renewed interest in the drugs giant and Astra fell 34p to 4632.5p.

The M&A rumour mill drove the FTSE 100 to a seven-week high, up 69.75 at 6769.91.

On the FTSE 250, Serco hit a seven-year low after issuing its third profit warning in less than a year and warning it may have to tap investors. Andrew Gibb at Investec thinks the troubled outsourcer may need as much as £500m. Serco, which welcomes Rupert Soames as chief executive tomorrow, fell 60.7p to 343.8p.

Mid-cap-listed satellite builder Inmarsat slid due to fears over its exposure to Russia: Russian-owned International Launch Services is slated to launch its GlobalXpress satellite. Despite reassurances that it will not be delayed, the shares fell 28.5p to 735.5p.

Data centre provider Telecity soared 94p to 728p after a bullish update reassured investors that the company's run of bad form was coming to an end.

On Aim, China's HaiKe Chemical Group leapt 6p to 27p after announcing plans to sell its refineries, debt and biochemical unit to focus on specialty chemicals.

Budget African airline Fastjet climbed 0.12p to 1.92p after scaling back its loss-making businesses in Ghana and Angola.

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