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Daily Telegraph: Market report

By Yvette Essen
(Filed: 15/06/2006)

It was Bid City as numerous takeover rumours flew around dealing floors surrounding a host of companies including AstraZeneca, Crest Nicholson and Tullow Oil.

Drugs giant AstraZeneca was the biggest riser in the FTSE 100 as hopes resurfaced that Swiss company Novartis could have the stock on its watch list and may pay as much as £40 a share for the company. The shares rose 74p to £30.16.

Housebuilder Crest Nicholson rallied to as high as 519p on renewed rumours that rival Bovis Homes was taking a stake in the group. Traders have speculated for months that entrepreneur Gerald Ronson’s 23.4pc holding in Crest is up for grabs and that a sale of the stake could act as a launch pad for a bid for the entire company.

The shares are held by Mr Ronson’s investment vehicle Heron Corporation and were built up as he attempted – and failed – to take Crest private. Crest rose 17½ to 505p and Bovis Homes put on 17 to 779½p. Tullow Oil had a volatile day of trading with the shares rising to 315p before eventually closing down 17¼ to 300¾p. It was boosted by talk that Royal Dutch Shell was considering a bid for the oil exploration group.

However, Tullow director Graham Martin said it is not aware of any takeover approach. He told Bloomberg: “It’s certainly news to us. I have not heard a thing. We wouldn’t welcome a bid by any company.” Royal Dutch Shell fell 32p to £17.35.

The variety of takeover rumours helped lead to a respectable 3.35bn shares changing hands. One sceptic commented: “Certain shares felt like they wanted to go up like a homesick angel. But with the market being hellish for dealers over the past month, it would suit them if some of their investments enjoyed a rapid ascent.”

The FTSE 100 traded as low as 5475.6 before eventually closing down 12.8 at 5506.8, while the FTSE 250 rose 60.5 to 8782.2. A number of shares traded without the right to their dividend, including telecoms giant Cable & Wireless and discount clothing and home furnishings retailer Matalan. As London closed, the Dow Jones had recovered 59 points.

Lloyds TSB rallied 12 to 515p after Morgan Stanley upgraded the shares from equalweight to overweight, saying it “could prove to be the best story in UK banks in 2006”. In a bullish 18-page note, the broker said: “We think stronger operating trends are now in place at Lloyds TSB than the market gives credit for as the new management team begins to revitalise the franchise. Furthermore, we expect that many of the new initiatives across the group are only now beginning to have an impact.”

Citigroup cut its target price on GUS from £11.50 to £10.25. However the retailer, which has recently been cited as a takeover target, ticked up 12 to 914p.

The old story that Imperial Tobacco could tie up with Spanish cigar maker Altadis flared up again. Separately, ABN Amro also upgraded Imperial Tobacco from hold to buy and repeated its target price of £18.60. It said in the absence of a bid, Imperial could increase its annual share buyback from £450m to up to £1bn, although a more likely figure is to £600m. Imperial fell 7p to £16.13.

Tesco, Britain’s biggest supermarket chain, posted first quarter sales at the lower end of market expectations. Tesco shed 2½ to 327¼p but its figures boosted rival J Sainsbury, up 7¾ to 318¾p.

The financial stocks were the main fallers. Friends Provident eased 3½ to 166½p, Royal Bank of Scotland drifted 24p lower to £16.96 and Royal & Sun Alliance was 1½ lighter at 120¼p.

In the FTSE 250, Jardine Lloyd Thompson surged 23½ to 345p. The insurance broker has struggled this year, falling from 499p but has recently been rumoured to be involved in corporate activity. Dealers have reckoned that a tie-up with another broker, such as Benfield Group or Heath Lambert, could be on the cards.

AB Ports climbed 49½ to 826½p. The group agreed to an 810p-a-share offer made by a consortium led by Goldman Sachs but Dresdner Kleinwort Wasserstein was rumoured to be trying to buy shares at 820p on behalf of a rival bidder.

Elsewhere, chilled convenience food group Uniq ticked up 4 to 150p. Newly appointed non-executive deputy chairman Ross Warburton bought 50,000 shares at 144.6p and chief executive Geoff Eaton purchased 67,980 shares at 145.9p.

First day dealings began in Tianshan Goldfields, which aims to explore and develop gold deposits in China. Shares were placed at 12p and closed at 12¾p.


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