After a couple of quiet sessions, the London market exploded back into life yesterday, helped by another flurry of bid speculation and a 3.75% rise in the share price of heavyweight telecoms company Vodafone as rumours of a boardroom reshuffle did the rounds.
The mining sector provided yesterday's two most interesting takeover tales. Xstrata climbed 24p to £16.45, excited by talk that it could be a target for BHP Billiton, off 1p to 961p, once the world's biggest mining company has paid off all its debt. According to Australian investment bank Macquarie, that could happen within the next 18 months, such is the rate at which Billiton is generating cash.
However, traders said the City's smart money was chasing Lonmin, the world's third biggest platinum producer. The remnant of Tiny Rowland's business empire in Africa is widely believed to have held takeover talks with rival Impala Platinum a couple of years ago. The word in the Square Mile is that the company, which has outperformed the FTSE mining sector by 25% this year, has received an approach from a North American mining company. However, analysts said hopes of a bid from Barrick Gold were likely to prove wide of the mark. Lonmin shares closed 14p higher at £21.40 - a record.
Away from the miners, talk of a £16-a-share counter-bid from France's Air Liquide saw BOC, the industrial gases group which recently rebuffed a £15 offer from Germany's Linde, move up 33p to £14.90. Cadbury Schweppes, which is due to file full-year figures on Tuesday, gained 8.5p to 573p as rumours of predatory interest from US chocolate maker Hershey refused to die down, while a late flurry of buying, prompted by rumours of a 125p-a-share bid, saw Cable & Wireless end 1.5p higher at 107p.
In the wider market, leading shares closed at their highest level since June 2001. The final scores showed the FTSE 100 finish 37.4 points higher at 5828.9, with Vodafone the biggest riser. Its shares gained 4.5p to 124.5p on rumours, played down by sources close to the company, that chief executive Arun Sarin was about to step down as part of a major boardroom reshuffle that would see David Finch, the former finance director of O2, installed as its new boss.
The FTSE 250 index rose 34.3 points to 9368.9, while FTSE Small Cap index gained 5.4 points to 3539.9.
Back among the blue chips, BAE Systems rose 11.75p to 449.75p after Morgan Stanley upgraded to overweight and set a 480p target price. The US broker believes BAE will benefit from a stronger than expected American defence budget and moves to reduce its pension fund deficit.
Morgan Stanley was also behind the strong performance of Rolls-Royce, the aero engine maker. Its shares climbed 12.5p to 454.5p - a record - after the broker lifted its rating to equal-weight on the grounds that there is enough operating leverage in RR's business model to support continued profit growth.
A raised £25.25 target price from Swiss broker UBS, saw Man Group, the hedge fund manager and securities house, advance 72p to £21.99.
The recent strong run of Cairn Energy continued. The oil exploration company climbed a further 50p to £18.89 after Credit Suisse upgraded its rating to outperform, citing the likelihood that Cairn will increase its estimates of oil reserves at its Mangala and Bhagyam fields in Rajasthan, India.
On the downside, the broadcaster ITV eased 2.25p to 114.75p unsettled by reports which claimed its market share fell 4% to 23.2% in the first six weeks of 2006.
The insurer Royal & SunAlliance improved 0.25p to 124.75p despite news that Brandes, the closely followed US fund manager, had reduced its holding from 7.9% to 6.7%.
Among the mid caps, Shanks Group, the largest independent waste management company in Europe, gained 4.75p to 176.25p after Merrill Lynch upgraded to buy. On Monday, Shanks submitted its bid for the Greater Manchester landfill contract, which is worth £4bn over its 25-year life. If Shanks is successful, Merrill says the contract would double the company's UK footprint.
Star Energy was marked 7p higher at 322.5p as analysts said the company could benefit from the closure of Centrica's Rough gas storage facility in the North Sea. Star's Humbly facility accounts for about 10% of Britain's gas storage capacity and according to Panmure Gordon yesterday's incident at Rough highlights the need for diverse storage in the UK.
GamingVC Holdings rose 26.5p to 414p on talk that chief executive Steve Barlow rebuffed a fully financed 500p-a-share offer from a leading gaming software company this week.
Osmetech firmed 0.75p to 24.5p amid talk that testing of its cystic fibrosis diagnostics kit is ahead of schedule. Telecom Plus, the household gas, electricity and telecoms supplier, gained 6p to 160p after moving to solve its energy supply problems through a complex agreement with npower. Under the terms of the deal, Telecom Plus has agreed to sell its gas and electricity businesses to npower in return for a contract to provide billing, metering and debt collection services.
iSoft's landing
Healthcare software specialist iSoft closed lower yesterday amid further fallout from its recent profits warning. Late yesterday, Morgan Stanley, one of iSoft's two corporate brokers, downgraded its rating on the stock and set a 160p downside target price citing concerns of accounting led earnings downgrades. "We don't believe news of product delays means that iSoft won't be able to deliver on its NHS contract commitments, more likely that cash flows from successful delivery will be delayed," the broker said. The shares halved in value two weeks ago after the company said it would suffer a large shortfall in profits because of delays to the £6.2bn programme to modernise the NHS's computer system. They ended 0.75p lower at 174.25p last night.