Market Report: Xstrata extracts fresh interest from Vale bid talk

Mining sector investors, hitherto transfixed by China's attempt to interpose itself between Rio Tinto and rival BHP Billiton, renewed their interest in Xstrata yesterday.

Vale, the Brazilian mining giant, which confirmed its interest in the company in January, is expected to make a formal approach soon and, yesterday, as the Rio-BHP saga continued to unfold in the background, the market was abuzz with speculation about the value of the prospective offer. While estimates varied during the course of the day, most pegged Vale to bid around 4,500p per Xstrata share.

There was also detailed talk about the finances – Vale is believed to have drafted the assistance of some leading city banks, including HSBC, Lehman Brothers, Citigroup and Credit Suisse. They, it was being speculated yesterday, would likely seek to finance the acquisition with a two-year bridge loan, similar to the one employed to aid Vale's 2006 acquisition of Inco, the Canadian nickel maker.

The chatter took Xstrata's stock to 3,835p, up 45p or 1.19 per cent.

On the downside, bid speculation failed to rescue Antofagasta. Early-morning whispers suggested the company had caught the fancy of a prominent sector counterpart.

The rumours, which, by mid-afternoon, had the unidentified suitor working on a formal bid, were neutralised by weak copper prices, which pulled Antofagasta's stock down by 0.22 per cent, or 1.5p, to 674p.

Others in the sector, including Rio Tinto, which closed down 0.31 per cent or 17p at 5,417p, BHP Billiton, which shed 4.82 per cent or 77p to 1,520p, and Vedanta, which was off 2.54 per cent or 49p at 1,882p, were also the victims of bearish investor sentiment and weaker metal prices.

ITV, the broadcasting company, was buffeted by bid talk again. A group of private equity companies, including Apax, Kohlberg Kravis Roberts and Provident, were rumoured to be interested in an approach earlier in the week. The talk dried up on Tuesday, when fresh speculation suggested that Apax wasn't mulling an offer after all. Investors, however, were still excited by the prospect yesterday.

As one trader said: "The fact that Apax is probably out doesn't matter – a takeover is still likely. It just narrows the field." The company's shares closed up 2.96 per cent or 2.2p at 76.6p.

Overall, the FTSE 100 ended firmer. After spending most of the day in the red, UK blue chips got a boost from a triple-digit Wall Street rally which helped lift the market ahead of today's interest rate decision from the Bank of England. By the close, the index of 100 leading shares was up 7.4 points to 5,875.4.

Along with ITV, Shire Pharmaceuticals was the subject of some bid talk. Both Barr Laboratories and AstraZeneca were touted as potential bidders, and Shire stock closed up 0.89 per cent or 8.5p at 960.5p. AstraZeneca closed down 1.79 per cent or 37p at 2,028p.

Both Unilever and Smith & Nephew registered gains ahead of results, which are due to be published today. By the close, Unilever was up 2.41 per cent, or 39p, to 1,655p, while Smith & Nephew was up 0.64 per cent, or 4p, to 625p.

The FTSE 250 failed to replicate the FSTE 100's late-afternoon recovery, closing 0.51 per cent, or 50.8 points, lower at 9,904.

Continued speculation about the fate of Northern Rock took the embattled lender's stock up to the top of the index. It climbed 8.89 per cent or 8p to 98p by the end of the day.

Northumbrian Water wasn't far behind, perched at fifth place, after investors, attracted by continued hopes of consolidation activity among small utility companies, moved in to the stock. The company's shares rose 4.2 per cent or 14.5p, by the close.

Dresdner Kleinwort helped Party Gaming slide in behind Northumbrian, at eighth place on the leader board.

Noting that the industry was "still relatively nascent and growing at 20 per cent-plus per annum", the broker advised investors to buy the stock. The company's shares closed up 3.85 per cent or 1p at 27p.

The car retail company Pendragon enjoyed its own rally as investors sniffed a potential takeover offer. The company, which operates from nearly 400 retail sites, gained almost 5 per cent or 1.5p to 31.75p.

On the Alternative Investment Market, Earthport, the electronic payment systems company, also had a good day on the back of some bid speculation.

The company, which issued a bullish trading update last month, was buoyed as rumours of some aggressive stake building by interested parties began circulating late in the afternoon, taking the shares up by almost 10 per cent or 6.75p to 74.75p.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn