Market Report: Renewed bid talk revives Cable & Wireless

Tuesday 09 July 2013 01:37

In an eagerly awaited strategy presentation, France Telecom showed it is in good financial health and has ample firepower for acquisitions.

According to Dresdner Kleinwort Wasserstein, the French operator has up to €20bn (£13bn) of headroom for acquisitions, and the German broker predicted this is likely to keep the C&W takeover story alive for some time.

Meanwhile, C&W is in talks to buy Energis, the heavily indebted UK telecoms supplier. A tie-up would create a clear No 2 in the British market, behind BT Group, and would generate cost savings of up to £150m.

Elsewhere, Reuters added 5.75p to 394.75p as JP Morgan was heard urging its clients to pile into the information provider before next month's second-quarter results. This month Cazenove also encouraged investors into Reuters, convinced that the group's forthcoming results will impress the City.

JP Morgan believes the figures will show positive revenue growth at the company for the first time since 2001. It calculates that sales growth of 4 per cent is easily achievable and that every 1 per cent of growth above this figure causes Reuters' earnings to rise an impressive 5 per cent.

The information provider is engaged in a £600m share buy-back programme. JP Morgan believes Reuters has the financial muscle for a further £500m buy-back. Setting a 450p price target on the stock, the broker concluded: "Buy now before the stock moves in anticipation of second-quarter figures."

Corus rallied 2.25p to 42.75p after Mittal Steel, the world's largest steel maker, announced plans to cut its global output by 1 million tonnes to compensate for lower demand.

The company, owned by Lakshmi Mittal, the Indian entrepreneur, is the latest steel maker to reduce its output in an attempt to halt the sliding price of the commodity. Quite simply, the likes of China are no longer consuming as much steel as they did last year. According to the latest industry data, consumption of the metal is expected to grow 1.2 per cent in 2005 compared with 2.8 per cent last year.

Tomkins put on 2.25p to 265.25p as James Nicol, the chief executive of the engineer, bought 10,000 shares at 259p. BAA gained 23.5p to 622p as UBS argued that the stock has fallen too far because of worries about a review of the regulatory regime that governs the airport operator. The Swiss broker noted that the review will not take place until 2008.

Game Group dropped 0.75p to 80.25p as investors exited the computer games retailer in the run-up to next week's annual meeting. Evolution Securities fears that things have got tougher for the company since it last updated the City in mid-April, particularly because of the limited number of computer games releases.

Among smaller companies, European Diamonds added 2p to 41.5p after announcing the start of diamond production at its new plant in Lesotho. Investors were also excited by news that Buddy Doyle, the former head of diamond exploration for Rio Tinto in Canada, had been appointed as chairman of the company.

Meanwhile, brokers tipped Firestone Diamonds, off 2.5p at 154.5p, to releasebullish news about all four of its joint ventures with the industry giant De Beers over the next few months. Firestone is focused on developing sites in South Africa and Botswana.

Big Yellow dropped 3.5p to 189.5p on worries that the self storage specialist has suffered a slowdown in trading over the past few months. Likewise, Huntleigh Technology lost 7.5p to 321.5p as investors fretted that the group continues to suffer from cutbacks by NHS trusts on spending on equipment.

Persian Gold, another mining company from John Teeling, the Irish entrepreneur behind Petrel Resources and African Gold, is expected to float on AIM today. Persian Gold, which has a prospect in the north-west of Iran, is believed to have raised £1m at 25p.

Also listing today is Bango, a company focused on providing technology and services to businesses looking to make money from people who access the internet via their mobile phones. The group is expected to secure a stock market valuation of about £35m after a £7m fund raising by Panmure Gordon at 134p.

Finally, gossips reckon a formal takeover offer for Moneybox, unchanged at 39.5p, is on the way. At the end of March, the cash-machines operator indicated that it had received a bid approach.

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