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The Guardian: More enter the takeover spotlight: ‘Royal Dutch Shell… revived talk of a merger with BP, France’s Total or even Gazprom’

EXTRACT: Royal Dutch Shell was not immune to the rumour mill. Its A shares jumped 54p to £18.31 on revived talk of a merger with BP, France’s Total or even Gazprom. It has also re-started oil production in Nigeria after the ending of a protest by villagers.

THE ARTICLE

Nick Fletcher
Friday May 18, 2007

Another splurge of bid speculation and a host of broker recommendations put some life into the market yesterday. Credit information business Experian – recently spun out of GUS – added 22.5p to 598.5p. The company moved into the takeover spotlight after US rival Acxiom Corporation was bought for $3bn by investment group Silver Lake, the offer being a 14% premium to its share price.
British Airways was also in the takeover frame after Goldman Sachs said the airline was the “jewel in the crown” for potential private equity and other predators. It said the shares, up 11.5p to 501.5p, were fundamentally cheap after they had fallen recently on worries about the implications of the “open skies” arrangements and weakening demand.

“We believe these concerns on open skies are misplaced and overdone versus the potential upside to revenue generation from the move to Terminal 5 in 2008.”
Royal Dutch Shell was not immune to the rumour mill. Its A shares jumped 54p to £18.31 on revived talk of a merger with BP, France’s Total or even Gazprom. It has also re-started oil production in Nigeria after the ending of a protest by villagers.

Oil group Cairn Energy rose 62p to £17.35 on whispers of a possible bid from Swiss oil refiner Petroplus. Traders reported some buying of Ladbrokes shares, up 0.5p to 425.5p. Ladbrokes has recently been linked with a possible bid from a private equity group such as Apax.

There was interest in Prudential on the day of its annual meeting. Its shares climbed 8p to 781.5p as it faced increasing pressure to split itself up, though it defended its current structure at the meeting. Earlier, banking group HSBC had seemed to indicate in New York that it was interested in acquisitions in the insurance market. HSBC, up 5p to 938.5p, has been linked before with an offer for the Pru, and that was enough to get traders talking.

Magazine publisher Emap climbed 43.5p to 881p after chief executive Tom Moloney left the firm. Dealers said the rise was partly explained by investors who had shorted the shares needing to cover their positions, and partly by bid speculation.

Simon Wallis at Collins Stewart said: “The break-up potential mitigates the risks [of a profits warning]. For all of Emap’s assets there are trade as well as financial buyers. The radio business could be wound up with GCap or Guardian Media Group for example. Lagadère’s Hachette or Bertelsmann’s Gruner & Jahr would be interested in magazines. United Business Media, Informa, Nielsen/VNU would be interested in the business-to-business assets.”

EMI was 3.5p better at 245.75p after opening its books to potential predator Warner Music. Building materials group Hanson slipped 20p to £10.80 as bidder HeidelbergCement snapped up 125m shares at £11 to take its stake to 27.75%, apparently dashing hopes of a rival bid.

Broadband business Pipex – which put itself up for sale but with no concrete success so far – added 1.25p to 13.25p. The rise came after Italy’s Tiscali said it wanted to expand in Britain and was reviewing a dossier on Pipex.

One of the formerly rumoured bidders for Pipex, BT, fell 9p to 306.25p despite buoyant final results, a £2.5bn buyback and news it was Britain’s top broadband provider. The fall followed comments by the company that it had not been approached by any private equity buyers and was not in takeover discussions.

Despite an opening fall on Wall Street and the closure of most European markets, the FTSE 100 index managed a 19.8 point rise to 6579.3 by the close.

One big gainer was financial group Old Mutual, 4.4p better at 180.3p after Deutsche Bank raised its price target from 190p to 200p. The bank said there were a number of fear factors used by investors to justify Old Mutual’s weak relative share price performance, including its exposure to the troubled US sub-prime mortgage market. “We argue that many of these [fears] are unfounded, immaterial or already allowed for in our valuation,” said Deutsche. “We conclude that the current share price builds in the worst case scenario on all fronts and thus reflects the ‘sum of all fears’ rather than the group’s sum-of-the-parts. We upgrade to a buy recommendation.”

On the results front a standout performer was shopping catalogue and educational supply firm Findel. Its shares jumped 87.5p to 749.5p after full-year profits rose 10%, with its home shopping business benefiting from an increasing number of online users.

Banknote printer De La Rue rose 5.5p to 713.5p after Dresdner Kleinwort suggested the company could announce another return of cash to shareholders along with its results next week. Dresdner predicts year end cash of £107.5m, which would give scope for such a move.

F&C Asset Managment slumped 10p to 183p. Its second largest shareholder Eureko plans to sell 44m shares, about 9% of the fund management group.

Island Oil & Gas fell 11.5p to 45p as broker Bridgewell carried out a share placing at 39p each to raise £12.5m to fund a drilling programme off the coast of Ireland.

Medical research firm Asterand added 0.625p to 7.625p after it revealed it had received a preliminary approach from a minority shareholder at 7.75p a share, which the company said significantly undervalued its prospects.

Sofa so bad

ScS Upholstery was marked down sharply in the dying moments of trading yesterday, closing 56.5p lower at 267.5p. This was the reaction to the furniture retailer releasing half-year results unexpectedly at 4.31pm. Needless to say the figures were dreadful, with pre-tax profits down 54% and a warning from chairman Mike Browne about the “challenging” outlook. He said ScS was unlikely to meet expectations for the 10-month period to the end of July. Seymour Pierce immediately cut its profit forecast for the full year from £16.05m to £14.5m. Analyst Richard Ratner said the firm had been over-optimistic in the past but was still a quality player in the furniture market. But he added: “At 4.30 on a Thursday evening we are putting our recommendation under review.”

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http://business.guardian.co.uk/marketforces/story/0,,2082739,00.html

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