Market Report: Inmarsat navigates its way to 18% premium

The global satellite phone services provider Inmarsat got off to a flying start on its maiden day of trading yesterday. The group's float is the biggest in London so far this year, raising £367m for the company, which has said it will use the cash to pay off debt. Inmarsat shares soared 18 per cent, gaining 43p to 288p, as investors climbed abroad buoyed by the fact that its private equity backers had not sold down any of their holdings in the float.

The global satellite phone services provider Inmarsat got off to a flying start on its maiden day of trading yesterday. The group's float is the biggest in London so far this year, raising £367m for the company, which has said it will use the cash to pay off debt. Inmarsat shares soared 18 per cent, gaining 43p to 288p, as investors climbed abroad buoyed by the fact that its private equity backers had not sold down any of their holdings in the float.

The buyout firms Apax Partners and Permira took control of the company two years ago, and following the initial public offering each own 16 per cent of the group. Inmarsat, which scrapped its IPO in 2001, has promised to pay at least half the cash it generates as a dividend to shareholders. As for the group's business, it specialises in linking trawlers, tankers, cruisers and patrol boats to weather maps and the internet - and makes good money out of it.

Inmarsat certainly picked a good day for its float. The FTSE 100 index registered a 32-point rise to 5,077.6. Blue chips got a boost from what proved to be an eventful futures and options expiry. Dealers reported a rush by those holding bull positions in various index derivatives to drive the FTSE-100 index higher in the minutes before the 10.15 am quarterly expiry. By pushing heavyweight stocks such as BP, Shell, Vodafone and HSBC higher traders can inflate the value of the FTSE 100 index and help transform what may have previously been a loss-making stake in a derivative into a profitable one.

Wolseley, 24p higher to 1,162p, was buoyed by forecast busting second quarter results from US construction peer KB Homes. Brokers said the figures showed that the housing market across the Atlantic remains strong, which is great news for Wolseley. The recent strength in the dollar will also positively impact Wolseley earnings and there was talk among brokers that next month's trading statement from the group could prompt upgrades to forecasts.

An upbeat note from Cazenove failed to get Rexam moving higher. The stock finished 5p lower at 480p despite an upgrade to "outperform" from "underperform" at the heavyweight broker. It believes that Rexam's low stock market rating and stable profit margins make it vulnerable to a bid from a private equity player. Cazenove is certain that the group's solid cash flows could support the heavy debt burden that a leverage buyout entails.

Although it is rare to see a finance house making a move on a FTSE 100 company, the broker pointed out that the size of private equity transactions has gradually increased in recent years. In terms of an exit from such an investment, Cazenove takes the view that a re-float of Rexam some years down the line is without doubt a possibility for a buyer. It believes that in five years the can maker is likely to be a much more sought after asset, especially as by then the Chinese and Indian soft drinks markets will have grown significantly.

Sainsbury, off 2.5p to 284.25p, was once again a talking point.

The latest story to surround the supermarket group suggested that the Sainsbury family might be tempted to sell their 35 per cent stake to a financial buyer. Allan Leighton was again named as the most lightly person to lead such a purchase.

However, analysts were sceptical that the Sainsbury family would want to sell at the present low point for company's share price, especially as recent figures from the group suggest that Justin King's reforms are starting to bear fruit. Next week Sainsbury's will issue a first quarter trading update and brokers expect the retailer to boast of a second consecutive quarter of like-for-like sales growth.

Yell dropped 6.25p to 429.25p as investors were unsettled to see some heavy director share sales. John Condron, chief executive at the directories group, sold 410,000 shares at 434p while John Davis, finance director at the company, disposed of 500,000 at the same price. In total, the duo bagged just under £4m from the deal. One can't blame them for cashing in some of their chips. Since Yell's float in 2003, the stock has soared by 50 per cent.

HR Owen slumped 26p to 167.5p after issuing a profit warning in which the car distributor told investors that it would post a loss for the year. The group said it needs to sell some of its franchises in order to reduce its £80m debt burden.

The profit alert implies fellow car dealers are having a tough time of it. Hence, Reg Vardy dropped 10p to 490p, Lookers fell 13p to 315p and Caffyns retreated 27.5p to 757.5p. Also, dealers reported bears opening some sizeable short positions in Pendragon, off 0.25p to 280p, ahead of an expected trading statement from the group within the next month or so.