Market Report: Sainsbury’s, InterContinental Hotels and United Utilities all rise on hopes of billion-pound tie-ups

It seems deal stories are like buses – you wait ages for one, then three come along at once.

Sainsbury’s, InterContinental Hotels and United Utilities all rose on hopes of billion-pound tie-ups yesterday.

IHG jumped 84p to 2,537p after San Francisco activist investment fund Marcato, which revealed a 4 per cent stake in the company in May, sent a letter to IHG shareholders yesterday urging them to push for a merger with a rival such as Hilton or Marriott. IHG rebuffed a £6bn offer from an unnamed US suitor earlier this year and Marcato’s calls for management to reconsider at the time were brushed aside.

Now, after hiring investment bank Houlihan Lokey to run the numbers on a potential deal, Marcato has taken its case directly to investors, claiming a merger could as much as double IHG’s share price.

J Sainsbury, meanwhile, rocketed 14.4p to 269.1p, topping the Footsie despite widespread expectations that today’s interim results will make for painful reading – the company is the most shorted stock on the FTSE 100. Sainsbury’s improvement was driven by speculation that an American activist investor could get involved in the company – UK fund Crystal Amber, which pushed for change at Thorntons, has been assessing the company for an unnamed American fund and sources say both parties are waiting for today’s numbers before deciding to take a stake.

And United Utilities added 19.5p to 883p as rumours of a potential takeover bid returned. Chatter has been percolating through the City that the Ontario Teachers’ Pension Fund is interested. Yesterday the Kuwati sovereign wealth fund was added to the mixer as a potential bidder. £12 is the speculated bid price.

Despite the blue-chip rumour mill kicking into overdrive, the FTSE 100 only managed a 16.15 point gain to 6,627.4. Sports Direct, down 29.5p to 627p, weighed on the index with investors unimpressed by plans for a new budget gym chain that will charge just £5 a month. An upgrade to profit expectations by as much as 50 per cent sent mid-cap engineer Renishaw soaring 175p to 1,943p.