Market Report: Dimension Data in the frame for takeover

The word among technology investors is that Dimension Data, the South Africa-based reseller of Cisco Systems infrastructure kit and manager of IT services, is in the frame for a takeover bid.

The shares topped the mid-cap risers yesterday with a 1.5p gain to 42p, although there was little indication as to who the bidder might be. If a bid does come, it is unlikely to be much comfort to long-term shareholders, but traders are talking about a take-out price of up to 55p per share so there is some potential upside left in the stock. Even so, as it was once a member of the FTSE 100 back in the dotcom-boom days, traders said that a takeover at any price will come as a relief to some holders.

The A$9.9bn (£4bn) bid for Qantas by Macquarie Bank and Texas Pacific set tongues wagging in London as investors bet that British Airways will also face a bid. The talk drove BA shares 17p better to 498p by midday. The brokers Panmure Gordon and Collins Stewart both told clients that a bid for BA should not be ruled out if it was done along the same lines as the Qantas deal. Collins Stewart upped its stance on BA to "buy" and raised its price target to 570p. The shares closed at 491p, up 10p after some profit-taking in line with the weak afternoon market.

Morrison Supermarkets was 0.75p better at 259.25p as a rumour did the rounds that the company is about to announce a special dividend. Some traders believe that a special payout could come on the back of a property reshuffle and act as a "poison pill" to any group considering a takeover. Its food retail rival J Sainsbury was out of favour as the broker Shore Capital reiterated its "sell" advice, closing 5.5p worse at 402p.

The shopping centre and commercial property group Liberty International was high on the list of blue-chip fallers after raising £337.5m of new capital via a placing of 25 million new shares at 1,350p per share. The group will use the proceeds to cut its borrowing. The brokers JP Morgan and Exane BNP Paribas reiterated their underweight stance on the stock in light of the placing as the shares closed 81p worse at 1,330p.

The word among traders is that Wolseley, 19p worse at 1,168p could be braced to give the market some bad news. That the company is heavily involved in the US housing industry will not be news to investors, but there are rumours flying around that the sharp decline in new house builds in the US could lead it to warn on profits. However, some traders shrugged off the stories and took the fall as a buying opportunity.

London shares were strong in early deals, pushing the blue-chip index 30.5 higher to 6233.1 by mid morning. However, concerns over interest rates and profit-taking on recent merger and acquisition speculation saw the FTSE 100 collapse in the afternoon to close 42.3 lower at 6160.6.

The pub and bar group Mitchells & Butlers is due to report full year earnings next week, and the broker Deutsche Bank believes there is plenty of upside left in the shares. The investment bank upped its target to 740p from 700p and reiterated its "buy" advice. Early deals saw the shares 6.5p firmer at 668.5p, a new intra-day high, before a bout of profit-taking left them 9.5p worse at 652.5p.

According to some traders, the satellite communications group Inmarsat is one of the pricier stocks in the mid-cap market, trading on just over 60 times consensus forecast 2006 earnings. Its chief executive Andrew Sukawaty might be inclined to agree; he revealed a sale of 1 million shares yesterday at 398.52p per share, over a quarter of his total holding. Even so, the shares ticked 2.5p firmer to 398.75p.

It wasn't just supporters of Celtic cheering on the football team on Tuesday night. The club's win over Manchester United puts Celtic into the last 16 of the lucrative Champions' League for the first time, sending the shares 3.75p firmer to close at 34p.

A profit warning from Global Marine Engineering gave the shares a hammering, 6.75p worse to 16.5p. However, the company confirmed $20m (£10.4m) worth of orders that should be completed in the next financial year. The word is that there is another potential $25m worth of orders and if the company hits internal targets there should be a decent profit in the second half.

Investors will be on the lookout for Wren Homes when the company moves from Plus Markets to AIM a week from today. The company has raised £3m of new funds via a placing with institutional investors at 36p per share. The shares closed at 45.5p on Plus Markets yesterday.