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Renewed takeover talk fuels big rises at Shell and BG

THE TIMES (UK): Renewed takeover talk fuels big rises at Shell and BG

“…the recent surge in Shell also rekindled talk that the company may use the strength of its paper to mount a takeover of BG, its oft-mooted target.”:

Wednesday June 29, 2005

TAKEOVER favourite BG Group surged to a record high on the conviction that the oil and gas industry is on the verge of another wave of large-scale merger and acquisition activity.

In volume terms, it was Shell that dominated yesterday’s activity, with the Anglo-Dutch major gaining 17p to 545p on turnover in 110 million shares as shareholders approved the unification of its share structure, triggering further buying by fund managers to take account of an increase in its weighting within the FTSE 100 from 4 per cent to 10 per cent on July 20.

But the recent surge in Shell also rekindled talk that the company may use the strength of its paper to mount a takeover of BG, its oft-mooted target. Although Shell is seen to have its hands full in the short term in adjusting to its new capital structure, that speculation was given weight by Morgan Stanley, which yesterday raised its short and long-term oil forecasts, its natural gas price estimates and its profit forecasts for the European sector, in what it described as the largest changes it has made to long-term earnings for years.

Neil Perry, analyst, contends that the industry is going through a period of structural change, the logical outcome of which is a further round of consolidation. Further, he believes that this could effectively prove a repeat of the big-ticket tie-ups witnessed between 1999 and 2001. Alongside Shell, BG Group advanced 18¼p at 472p, helping the FTSE 100 to settle 46.9 stronger at 5,090.4, its best rise for six weeks.

But Capita Group eased ½p at 371¾p as Dresdner Kleinwort Wasserstein downgraded the outsourcing specialist from “add” to “hold” after a meeting with management on Monday evening. The German broker says it has become slightly nervous on this year’s revenue forecasts in the light of a lack of news on contract wins, and had lowered its top-end forecasts back in line with consensus.

National Grid Transco gained 9p at 536p as Deutsche Bank raised its price target from 550p to 600p, having raised its earnings forecasts by 22 per cent in the wake of full-year results.

A bid for Telfort of the Netherlands by KPN underpinned a 2¾p rise to 129p at O2, as did the purchase of 50,000 shares at 128p by Patrick Lupo, a non- executive. ITV added 1p at 116p ahead of today’s expected announcement on the reduction in analogue spectrum fees that the broadcaster will pay to the Treasury. Although analysts have been expecting a cut of between £80 million and £100 million from the current £204 million, recent whispers have pointed to a £120 million concession, meaning the shares could react adversely if the actual number falls short.

NEW YORK: An upbeat report on consumer confidence lifted the Dow Jones industrial average, which closed up 114.85 points at 10,405.63.

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