Market Report: Bid battle talk helps Micro Focus to advance

Renewed hopes it could become the subject of a takeover battle helped switch investors on to Micro Focus last night, driving the software group high up the mid-tier index.

Market gossips have long discussed the possibility of a bid emerging for the company, and the chitter-chatter was given extra impetus in February when a profit warning prompted it to lose more than a quarter of its share price in one session.

Less than a fortnight ago the speculation was confirmed as Micro Focus announced it had received a "very preliminary" approach, with reports claiming the US private equity firm Bain Capital was the interested party.

Yesterday the group surged 8.8p to 372.8p after Panmure Gordon's George O'Connor said he believed if and when a formal offer was tabled, it would spark a rush of rival bids.

Revealing his pessimism about the company's performance ahead of its trading update next Thursday, the analyst said he was "more confident of a bid and that it will be contested."

Mr O'Connor reiterated his "buy" advice and raised Micro Focus' price target to 427p from 400p, saying there was "a 'wall of money' in the industry earmarked for mergers and acquisitions".

He added there were "few large global software business with roughly 18,000 customers around" and said "selling the company would be 'in form' for the management team which could exit with heads held high".

Other companies that have been previously mentioned in vague speculation as potential bidders include IBM and SAP.

In early trading it looked as if a terrible week was going to finish with another big fall for the FTSE 100, as – after plummeting more than 160 points in the previous two sessions – the top-tier index moved well below the 5,900-point level. Yet positive job data from the US sparked a much-needed rally, and by the bell it had charged forwards 56.79 points to 5,976.77.

ARM Holdings also left it late, spending the morning in the red before shifting up 28p to 595p. The Cambridge-based group has been under pressure this week on fears of increased competition from Intel, but yesterday it was helped by vague talk Apple could end up using ARM's technology in its laptops.

The chipmaker was not able to take the top spot from Royal Bank of Scotland, however, despite the group revealing a loss over the first quarter of more than £500m, as a rise in its core profits pushed it forwards 2.26p to 42.74p.

The sun was shining on Carnival, with the world's largest cruise company still benefiting from declining oil prices. The group, which jumped up 50p to 2,600p, does not hedge its fuel costs, leaving the fortunes of its share price highly reliant on the black stuff.

It was also good news for International Airlines Group, and it flew 8.1p higher to 254.1p as it revealed a first-quarter loss of €100m (£87.8 m), nearly €25m less than expected.

SABMiller ticked up 37.5p to 2,247.5p after fears it could be tempted to make a play for Foster's were dampened by Citigroup. The Australian drinks group is spinning off its wine unit, leaving it open to talk it could be a bid target for others in the sector. However, according to the broker – who reiterated its "buy" advice – such an acquisition would "not be financially attractive" for the Grolsch-brewer.

Citi's analysts also addressed speculation SABMiller could make such a move as a defensive measure against a possible approach from Anheuser-Busch InBev (ABI), saying the owner of Budweiser would not be put off by the enlarged company.

"If the market thought SABMiller had overpaid for Foster's or the Australian business deteriorated further... then the potential resulting share price weakness might make [it] more vulnerable to a bid from ABI, not less," added its analysts.

On the FTSE 250, Laird climbed 5.7p to 143.2p after revealing a rise in its revenue of 12 per cent over the first quarter, while Rentokil Initial surged 3.2p to 94.25p even as its profit dropped 10 per cent. The gold medal was claimed by Cable & Wireless Worldwide, 2.91p higher at 49.74p, as vague takeover speculation around the telecommunications group was reheated.

Also advancing was Booker – 1.9p ahead at 62.4p – after Citi initiated coverage on the wholesale retailer with a "buy" recommendation, while at the other end, Millennium & Copthorne slipped back 24p to 511p as the hotel group's first-quarter results ended up missing expectations.

A profit warning, plus news that a possible accounting error may have meant it has overstated the amount its debtors owe by roughly £25m, left Helphire's share price decimated on the small-cap index. The accident assistance company lost more than 60 per cent of its share price, as it was knocked back 7.84p to 4.91p.

Meanwhile, on the Alternative Investment Market, Victoria Oil & Gas spurted up 1.06p to 5.6p after announcing it had been awarded a license by the Cameroon government to develop the Logbaba field in the country.

FTSE 100 Risers

ITV 75.6p (up 3.5p, 4.85 per cent)

Broadcaster's shares rise as JP Morgan Cazenove keeps its "overweight" advice and says it is undervalued.

Weir Group 1,913p (up 63p, 3.41 per cent)

Engineering group benefits from Goldman Sachs increasing its target price from 2,521p to 2,650p.

BP 454.7p (up 13.65p, 3.09 per cent)

Sees late surge as arbitrators allow Rosneft share swap on condition that it hands Arctic opportunity to TNK-BP.

FTSE 100 Fallers

Schroders 1,680p (down 20p, 1.18 per cent)

Investment manager falls after Credit Suisse reduces its target price from 1,850p to 1,700p.

Fresnillo 1,436p (down 9p, 0.62 per cent)

Miners latest fall finishes a tough week in which its share price dropped by more than 12 per cent.

IMI 1,058p (down 5p, 0.47 per cent)

Engineer's price falls despite saying its first-half results would beat previous year, and announcing new chairman.

FTSE 250 Risers

Rightmove 1,085p (up 46p, 4.43 per cent)

Property website's latest move leaves it at its highest share price since floating in 2006.

easyJet 355.1p (up 12.2p, 3.56 per cent)

Budget airline announces its traffic for last month rose more than 35 per cent.

Rank 148.8p (up 1.9p, 1.29 per cent)

Guoco forced to make offer for bingo hall operator after increasing its stake to nearly 41 per cent.

FTSE 250 Fallers

Pace 153.8p (down 4.3p, 2.72 per cent)

Set-top box manufacturer falls ahead of next Thursday's interim management statement.

Ferrexpo 452.9p (down 9.7p, 2.1 per cent)

Iron ore producer's latest retreat means it dropped more than 9 per cent over the week.

Lancashire 630p (down 10p, 1.56 per cent)

Insurer behind despite revealing a pre-tax profit of $8.4m for the first-quarter.