Market Report: Travis Perkins tie-up talk helps Howden to rise

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The takeover potential of Howden Joinery was being sized up last night, as City scribblers suggested the kitchen supplier could be a perfect fit for Travis Perkins.

Powering up 3.6p to 114.9p, the group was in focus after Evolution Securities said it could become a target for its peer, which itself was 27p better off at 1,048p. Speculation of such a move has been seen before, and the broker said that – having sorted out the competition issues of last year's £560m purchase of the plumbing group BSS – Travis "is now positioned for another deal".

"Both companies are UK-focused and kitchens are a complementary business line for Travis's merchants [unit], which could also be complementary to [its] Wickes retail business," Evolution said. However, it did warn that "to make the deal work at any level of meaningful premium, Travis's management would need to deliver some cost synergies".

The broker's analysts initiated coverage on Howden with a "buy" rating, claiming its "share price has the potential to double over the next two years". Even if Travis – which was also recommended as a "buy" – were not interested, they said, its "characteristics as a cash-generative market leader in its niche may attract other suitors with different hurdle rates of return for acquisitions".

Overall the FTSE 100 managed to jump up 32.5 points to 5,955.99, banking a second consecutive session in the blue for the first time since the start of the month. Unsurprisingly, the market debut of Glencore was the main topic of conversation in the City, yet despite an early rise the commodity company failed to finish away from its float price of 530p in grey trading.

Initial gains were also seen by the miners, but at the bell Rio Tinto had edged down 12.5p to 4,150p while Xstrata – often the subject of speculation it could be bought by Glencore – had eased back 12.5p to 1,392.5p.

The expected entry of Glencore into the top-tier index after its first session of full trading next Tuesday means someone needs to give way, and two of the most likely candidates released final figures yesterday, prompting major moves. Investec was the favourite to drop at the start of the day, but the investment bank advanced 25.1p to 487p to take the top spot despite its results missing expectations, though Numis Securities said the group's "quality of profit was materially better".

Invensys began trading as the second in line to be replaced, and the chances of it avoiding relegation to the mid-tier index were dealt a major blow after the engineer fell 9.6 to 299.8p, even though it said its operating profit had risen 6 per cent.

A number of companies were getting a boost from being picked out as bargains, including Petrofac. The oil services group shot up 57p to 1,528p after Collins Stewart upgraded its advice to "buy", saying its underperformance over the past nine months compared with its peers means its "risk-reward balance... is much improved".

Investors switching on to ITV lifted the broadcaster up 2.7p to 69.7p as Bernstein Research said its recent slump – the group's share price had fallen nearly 30 per cent in two-and-a-half months – has resulted in an "excellent entry point on the stock".

Meanwhile, Berenberg's Alex Potter said there was value to be found in Barclays – 6.75p ahead at 277.45p – and described its "very weak... performance" since its results in April as "an overreaction".

At the other end, Shire retreated 27p to 1,922p after the pharmaceutical group announced its rival Sandoz has said it wants to sell its own generic version of the company's hyperactivity product, Vyvanse.

On the FTSE 250, Lamprell rocketed up nearly 10 per cent – shifting 33.8p to 385.1p – following the agreement of a $336m deal to acquire Maritime Industrial Services. The purchase received a number of approving comments, including from Evolution, which said the Norwegian company was "expected to enhance substantially [Lamprell's] earnings per share in the first full-year post-acquisition and should at least match cost of capital in the first year too".

This week has seen market gossips return to a number of old favourites, and yesterday proved no different as vague speculation that Misys could be in line for an approach was reheated. The chatter, which was played down by traders, has emerged repeatedly this month, though the latest appearance saw the software company creep up only 2.6p to 356.9p.

Down on the Alternative Investment Market, there was a massive surge of nearly 140 per cent for Medicsight, with the penny stock driven forwards 4.72p to 8.1p after the US Food and Drug Administration approved the medical company's software, which is used to diagnose colon cancer.

At the other end, OMG – whose technology has been seen in the Chronicles of Narnia series of films – dipped 5.75p to 32.75p after revealing an adjusted pre-tax loss of £300,000 for the first six months of the year.

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