The Guardian: BG heats up on talk of a bid from BP

Nick Fletcher
Wednesday January 24, 2007

There was a late burst of excitement in gas group BG yesterday, up 11p to 662.5p, on vague rumours of a possible bid from BP, up 4p to 545p.

Some traders said BP’s soon to depart Lord Browne might see such a takeover as a fitting legacy, having apparently failed last year in an attempt to effect a merger with Shell. There were a few hefty trades going through for BG towards the end of the day but most dealers were sceptical of the tale.

Elsewhere a mixed bag of trading statements left the market struggling for direction, until a late rally from the miners came to the rescue.

Tate & Lyle and LogicaCMG were the big losers after they updated shareholders, but WH Smith’s Christmas performance received a rather better reception.

Sugar group Tate slumped 112p to 608p, a 15.5% drop, after it said results would be “modestly” below forecasts, mainly due to lower sales of its zero calorie sweetener Sucralose, also known as Splenda, in the US. This caught the market on the hop, even though last week Credit Suisse highlighted concerns the Sucralose business would not grow as rapidly as had been anticipated.

“Management’s previous bullishness was misplaced,” said analysts at Citigroup tartly. The Tate news dragged down other food companies, with Cadbury Schweppes 4p lower at 554p and Unilever 15p down at £13.84. Unilever was also hit by a negative note from Credit Suisse, which cut its rating from neutral to underperform, with a £13 target price.

LogicaCMG, the computer services company, fell 9.25p to 173.5p after it said margins had increased in 2006 but its overall growth rate disappointed the market. Credit Suisse reduced its target price from 200p to 190p while Citigroup was again fairly ratty: “After management’s upbeat presentation in December we are surprised the business appears to have slowed in the second half of 2006.”

Newsagent and bookselling group WH Smith did better. It added 21p to 395p despite saying like for like sales at its high street business fell 9% in the 20 weeks to January 20. Total like for like sales fell 6%. However it said margins had improved, and this was enough to save the shares.

Meanwhile sterling hit a 14-year high against a weakening dollar ahead of today’s Bank of England minutes relating to this month’s meeting when rates were unexpectedly raised, while oil, gold and nickel all moved higher. The firmer metals prices lifted BHP Billiton 22p to 939p and Rio Tinto 85p to £26.60.

So after being in the red for most of the day, by the close the FTSE 100 was 9.2 points higher at 6227.6, helped by the miners. However the FTSE 250 index of middle ranking companies failed to recover, falling 64.4 points to 11,102.2.

Dana Petroleum lost 21p to £10.67 after reporting that the Pomboo-1 exploration well off Kenya, where it has a 30% stake, was dry and would be plugged.

Mid-cap insurers were unwanted after Credit Suisse turned negative. Hiscox lost 17.75p to 247.75p as the bank cut its target price from 290p to 205p, while Amlin fell 19.25p to 304p as it downgraded from outperform to neutral.

Another loser was online gaming group PartyGaming, down 1p to 26.75p on continuing worries about the scope of US investigations into internet gambling. Rival 888 Holdings fell 10.25p to 105.75p.

Going the other way was Cairn Energy. Its shares have been under the cosh recently after the flotation of its Indian operations, but yesterday they added 19p to £17.02 on reports it had won, in partnership with India’s ONGC, two blocks in an auction of assets in the country’s gas-rich offshore exploration areas.

Smith & Nephew, the medical group recently tipped as a bid target for the private equity owners of rival Biomet, rose 13.5p to 566.75p. Goldman Sachs raised its 12-month target from 470p to 580p, saying S&N had scope to cut costs or return up to $1.2bn (£605m) to shareholders to pre-empt being taken over.

Housebuilder Wilson Bowden added 43p to £23.20 awaiting bid news. Dealers were talking of offers around £25.

The Competition Commission report into supermarkets was widely seen to be benign, and shares in the sector lifted. Sainsbury added 3.5p to 438p, while Tesco was 1.5p better at 415.25p.

Struggling record and book retailer HMV was unchanged at 134p despite news that US investor Brandes now holds a 10.15% stake.

Lower down the market Beowulf Mining was steady at 3.375p as it confirmed a licence application in Sweden for a copper, gold and uranium prospect.

Troubled software firm iSoft added 5.5p to 55p on reports that three bidders had reached the final stages of the takeover process. The three were said to be US healthcare firms McKesson and Cerner, and US private equity group General Atlantic. Other sources suggested the three might be partners in any bid, rather than rivals.

ClinPhone, which supplies technology to the clinical trials industry, lost 20p to 177p after warning the weak dollar would hit profitability, as would the cost of hiring and training new staff.

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