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Traders expect Ladbrokes bid for 888

This article is more than 18 years old

888 Holdings, the online casino and poker company, closed at a record high yesterday on hopes that it could be a takeover target for Ladbrokes once the bookmaker has completed the £3.3bn sale of its Hilton hotels.

Chris Bell, the Ladbrokes chief executive, is determined to make the most of the company's independent status by expanding overseas and online, and traders reckon 888 could be a tempting target for the cash-generative bookie.

888 operates Casino-On-Net, one of the most popular online casino sites, and Pacific Poker, the fourth-biggest internet poker site. Around half its revenues come from the US and analysts note that its chief executive, John Anderson, was once a Ladbrokes employee.

On top of that, 888 appears to be one of the cheapest stocks in the sector, trading on a prospective price-earnings ratio of 14, according to stockbroker Killik & Co. 888 shares, which floated at 175p in September, closed 2.25p higher at 210.25p, valuing the FTSE 250 company at just over £700m.

It was good day for online gaming and betting stocks. Spread betting group IG rose 6.25p to 180p in heavy trading on rumours that it too could be a takeover target for Ladbrokes or another bookmaker. Sector watchers also noted that stocks such as 888, IG and PartyGaming, up 1.5p to 138p, are still under-owned by UK institutions.

In the wider market, leading shares closed lower for the first time in 2006. The final scores showed the FTSE 100 23.4 points lower at 5691.4, dragged down by the mining sector, which was hit by a flurry of profit-taking, and a sell-off of utility stocks.

The FTSE 250 fell 59.4 points to 8898.3 as its housebuilding constituents came under pressure following a profits warning from Redrow, down 20p at 515p. The FTSE Small Cap index, meanwhile, improved 10.5 points to 3366.3.

Amvescap, the Anglo-American fund manager, managed to buck the weak market trend. Its shares gained 14.25p to 468p - the biggest rise in the FTSE 100 - after Deutsche Bank advised clients to buy before next month's investor update, hosted by Amvescap's new chief executive, Martin Flanagan. "We are confident Flanagan's investor update will deliver a clear, effective and measurable restructuring strategy," analyst Chantal Moshal said.

Deutsche Bank was also responsible for the strong performance of hedge fund manager Man Group. Its shares added 41p to a record high of £20.01 after the German broker raised its target price to £22.60, citing growth prospects.

Yell Group, owner of the Yellow Pages, was also in demand, rising 9.75p to 563.5p after Citigroup told clients to buy before this month's preliminary report on pricing from the Competition Commission.

On the downside, Compass Group dipped 5.5p to 225p after Citigroup placed 31m shares, around 1.4% of the contract caterer, for an institutional client. J Sainsbury finally came off the boil, easing 2.75p to 321p amid talk of a share placing. Sainsbury's two biggest shareholders are the Sainsbury family trust, which owns 18% of the company, and US fund management group Alliance Capital, which owns 12%.

Elsewhere in the retail sector, Kingfisher, owner of the B&Q DIY chain, eased 1.25p to 233p, unsettled by rumours of poor trading. Similar speculation rattled high-street name Woolworths, off 0.75p to 38.25p.

Lloyds TSB eased 0.25p to 492.5p despite rumours legendary US investor Warren Buffett was stake-building.

Premier Farnell was among the biggest fallers in the FTSE 250. The electronics components distributor fell 6.5p to 177.25p after an institution offloaded 7.5m shares at 174p through Goldman Sachs. Among the small caps, Celtic Resources was the main talking point. Its shares gained 17p to 210p on rumours that it could be close to announcing a deal that will see the company receive a $80m-$100m (£45m-£60m) cash payment from Russian mining group Norilsk Nickel in return for its stake in Nezhdaninskoye gold mine.

Ideal Shopping Direct remained in demand. The share price of the television and mail order shopping firm rose a further 15p to 338.5p after KBC Peel Hunt increased its profit forecast for this year and next and set a 500p target price. KBC cited strong Christmas trading and the growth of Freeview as the reasons for its upgrades.

Crosby Capital, the mini-investment bank focused on the Far East, gained 4p to 89p amid talk of positive news from Japanese conglomerate IB Daiwa. Crosby owns a big stake in Daiwa, which traders believe is about to announce a good drilling report from a Gulf of Mexico gas exploration project it is backing.

Petrel Resources rose 5p to 64p, taking its gains over the past two days to 20%, amid rumours of further oil exploration contracts in Iraq.

Finally, keep an eye on Libra Natural Resources, up 2.5p, or 15%, to 18.75p yesterday. Market gossips believe the company is set to announce the acquisition of an American company that specialises in the production of low-carbon fuel briquettes. According to the rumour mill, investors are lining up to back the £2m-£3m share placing that will be used to fund the deal.

Mowlem moves up

Mowlem, the civil engineering group, was in focus yesterday as it continued to trade above Carillion's 226p cash and shares offer. Mowlem rose 8.75p to 236p, excited by talk that Balfour Beatty would launch a counter-bid perhaps as early as next week, when the construction group is expected to issue a year-end trading statement. Analysts note that Balfour will have to offer at least 10% more than Carillion to win control of Mowlem. This is because two of Mowlem's biggest shareholders have pledged to back Carillion's offer unless someone bids 10% more. However, they believe Balfour could justify paying 250p a share for Mowlem but note that as Carillion's offer is being made by a scheme of arrangement Balfour will need to move by about January 20.

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