City speculators spent yesterday brushing up on their knowledge of the South African telecoms industry amid talk that one of its major players is set to make a move for Cable & Wireless.
The troubled telecoms company, which issued a dire profits warning last week, emerged as the third biggest riser in a very strong FTSE 100 as dealers bet that an approach could come within the next couple of weeks.
One name in the frame was Telkom SA, South Africa's biggest fixed-line telecoms company. However, analysts were quick to note that Papi Molotsane, its chief executive, was yesterday quoted as saying that he wanted to acquire a technology firm to beef up Telkom's data business, and had approached shareholders of FTSE 250 company Dimension Data, 2p higher at 50.25p, to see if they would back a deal.
However, speculators, who believe UK Plc is up for sale, were in no mood to let facts get in the way of a good story, and bid C&W shares up 3.75p to 106.5p.
In the wider market, leading shares recouped all of Wednesday's losses and more. Lifted by Wall Street's strong overnight performance, another flurry of bid speculation, and excellent fourth quarter results from BG Group, 57.5p stronger at 675p, the FTSE 100 closed 83.6 points higher at 5,808.7, its best finish since June 2001. Yesterday's rise was the biggest one-day points gain since October 31st last year.
Elsewhere, the FTSE 250 surged 128 points to 9,368.7 - a record high - while the FTSE Small Cap index added 21.5 points to close at 3,535.3.
Tobacco stocks were among the session's best performers. Imperial Tobacco, which produces John Player Special cigarettes, gained 56p to 1751p on rumours of an approach by Spanish rival Altadis to see if Imperial would be interested in buying key assets in the event of an Altadis break-up. Meanwhile, Gallaher, the maker of Benson & Hedges and Silk Cut, was marked 28p higher at 907p in the wake of nine-month figures from Japan Tobacco, which dealers said underlined its need to expand overseas.
Lloyds TSB was once again in the spotlight. Its shares, which started the year at 488p, gained a further 16p to 549p as rumours of predatory interest from Spain's BBVA or Dutch bank ABN Amro refused to die down.
Airports operator BAA was also in demand again, rising 27p to 779.5p as analysts predicted bidding could reach 900p-a-share. On Thursday, Spain Ferrovial said it was considering a cash offer for BAA. The recent good run of Marks & Spencer continued. The shares gained a further 3.75p to 513.75p, excited by talk that a European bank is attempting to put together a financing package for a leveraged buyout. Building materials group Hanson firmed 23p to 683p amid talk that it could be in the sights of France's Lafarge.
Great Portland Estates was among the FTSE 250's standout features. Its shares gained 16.25p to 429p after heavyweight broker Merrill Lynch slapped a "buy" recommendation on the stock. Merrill reckons the outlook for West End property is good, and notes that Great Portland has underperformed the property sector this year.
Jardine Lloyd Thompson was marked 17p higher at 451p as rumours of a merger with rival Benfield, down 3.75p to 354.25, did the rounds again. Kesa Electricals, owner of the Comet retail chain, firmed 3.25p to 261p on chatter that management buyout talks, rumoured last year to have reached an advanced stage, are back on. Private equity bid speculation also helped engineering group FKI firm 0.5p to 127p.
Group 4 Securicor, 6.75p better at 177p, was also in demand after Swedish rival Securitas reported better than expected fourth quarter figures. The stock was also lifted by a report from Swiss broker UBS which claimed a bid by Group 4 for Rentokil Initial's guarding business could be earnings enhancing.
Among the small caps, Aim-listed Proteome, which uses proteins to develop tests for diseases, rallied 9.25p to 58p on news that its largest institutional shareholder, US fund management group Fidelity, had increased its holding to 11%. A fortnight ago Fidelity lowered its Proteome holding, a move prompting some analysts to issue "sell" recommendations, citing fears the fund manager had given up on the company.
NCipher, the IT security specialist, firmed 3p to 301.5p as investors took the view that SafeNet's 300p-a-share offer, announced on Wednesday, could be trumped. Indeed, NCipher's chief executive Alex van Someron is on the record as saying another offer for the company is a possibility.
Advanced Fluids Connections, the former Oystertec, bounced 0.62p to 5.87p after a stock overhang was cleared, while Hawtin Group, the property management group, rose 3p to 16p after Gracelands Investments announced a 29.97% stake.
Max Petroleum, the oil and gas exploration firm focused on Kazakhstan, moved up 5p to 108.5p after house broker WH Ireland reiterated its "strong buy" recommendation and 190p target price. Analyst Philip Morgan believes recent share price weakness has created a good buying opportunity.
Gas pressure
BOC, the industrial gases group that recently rebuffed a £7.6bn, or £15-a-share offer, from German rival Linde, was back in focus yesterday. Its shares gained 23p to £14.87 amid talk that France's Air Liquide is set to enter the fray with a bid in excess of £16.00 a share. Air Liquide knows BOC well. With America's Air Products it made a £7.2bn offer for BOC in 1999 only to see US regulators block the deal. Traders reckon Air Liquide might bid for BOC in order to frustrate Linde. Another Air Liquide bid for BOC would almost certainly be referred to the competition authorities on both sides of the Atlantic and they could take months to rule on whether an offer should proceed. In that time, Linde could become a takeover target for the private equity industry.