Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:06 EDT, 21 February 2006

NEWS of German utility giant E.On's £38bn agreed bid for Spanish rival Endesa lit up City trading screens today, sparking the start of what it is thought will be wholesale consolidation of the European utilities market.

E.On's cash offer of €27.50 a share tops a hostile bid worth €21.30 from another Spanish utility, Gas Natural, and may be the first of many takeovers of utility companies across Europe.

Late last year, E.On expressed an interest in making an £11bn offer for Scottish Power - up 3p at 576p as 25m shares changed hands - but failed to agree terms. City speculators believe ScotPower will now engineer a merger with its local rival Scottish and Southern Energy, 16½p higher at a record 1157p.

Russian gas distributor Gazprom said just a few weeks ago that it wanted 20% of the UK gas market within the next few years and had already cast an eye over Centrica, the British Gas supplier.

Only last Friday, Centrica announced a 22% rise in the price it charges for consumer gas and electricity. Today its shares added 1¼p to 297¼p on turnover of 28m, with speculators again pinning their hopes on an eventual merger with Gaz de France.

International Power climbed 9½p to 284½p, reflecting its extensive asset base in Spain and the US, which would prove attractive to a predator. Even United Utilities put on 5½p at 688p after briefly touching 702½p. Brokers say its electricity business has underperformed and could be seen as vulnerable to takeover.

Buyers were also coming in for National Grid, up 7p at 586p, and debt-laden British Energy, 11¼p dearer at 631p.

Share prices generally traded below their best levels of the day after being undermined by opening falls on Wall Street this afternoon following its extended weekend break. Even so, the FTSE 100 index reached a new four-year high before closing down 5.3 points at 5857.7.

Drugs giant AstraZeneca climbed 33p to 2607p, excited by talk that it could find itself the target of a bid from Swiss rival Novartis. Astra is valued at £40.5bn.

Mobile phones operator Vodafone was 2¼p lighter at 120½p as US broker Bear Stearns repeated its underperform rating. It has also taken a closer look at its earnings forecast and decided to downgrade the telecoms giant to reflect its Telsim acquisition in Turkey and its activities in South Africa. It has reduced its earnings forecast for 2007 by 11.7% to 10.17p a share.

AIM-listed online gambler Sportingbet advanced 20p to 407p ahead of tomorrow's interim results.

The company's own broker, Investec, is forecasting that second-quarter operating profits will have risen from £21.5m to £31.4m, and talks of robust growth. Rival PartyGaming was also on the move, rising 4¼p to 123p.

Broker ABN Amro has lifted its rating from hold to buy and tweaked its target from 157p to 160p. It reckons the group will continue to generate growth in its core activities.

The acquisition of Empire-Poker.com will add 69,400 active customers to the 817,000 currently playing Partypoker. Deutsche Bank has begun coverage of household support specialist Homeserve, up 53p at 1635p, with a buy rating and 2013p price target despite attaching a valuation of zero to its international operations.

Cambrian Mining stood out with a rise of 14¾p to 124p after publishing a bullish set of results showing pre-tax profits soaring from £2.4m to £26.9m.

Broker Teather & Greenwood says the shares are trading on less than three times forward earnings and a 30% discount to its listed investments alone.

A big seller left troubled Regal Petroleum nursing a loss of 4½p at 56½p, after a line of 12m shares went through on the ticker at 56p. The group has been fighting in a Ukraine court over the ownership of certain assets. Earlier this week, the court dismissed the final appeal of its former partner CNGG.

AIM-listed Digital Classics was 0.07p firmer at 0.78p after completing the £12m reverse takeover of Done and Dusted, which televises rock concerts for the likes of Robbie Williams and Madonna.

Digital Classics chief executive Chris Hunt said the company's NBD TV and Box TV, which is behind the recent BBC production of Sweeney Todd, are trading ahead of expectations.