Market report: Friday close

By Sarah Marks for MailOnline
Updated: 12:23 EDT, 21 April 2006

A FLURRY of activity in National Grid today points to the presence of predatory interest in the UK power group. The shares rose 6p to 577p and were one of the most heavily traded stocks in the FTSE 100.

Traders reported heavy option buying at 575p, but were unable to pinpoint a potential acquirer. While the energy and utility sector has been an undoubted focus for takeovers, the dual nature of the Grid's business means it has not been considered a likely target.

On the one hand, it runs the heavily-regulated high-voltage transmission system in England and Wales, producing steady but unspectacular returns. On the other, recent acquisitions in the US have seen it become the third-largest gas and electricity company there. This growth was consolidated with the £6.8bn acquisition of KeySpan in February.

That side of the business would be more attractive to a growth-orientated buyer but the US government might not be keen on seeing control of power assets sold to a less-known foreign buyer - remember the furore when the Americans realised the sale of P&O to Dubai would hand over control of some of its ports to a Middle Eastern company?

But there are buyers out there for boring, regulated businesses. The Grid last year sold a number of gas distribution networks to, among others, Hong Kong's Cheung Kong - now said to be eyeing up Thames Water - a Macquarie Bank-led consortium and Canadian fund manager Borealis.

After closing lower yesterday, mining stocks surged forward, pushing the FTSE 100 to a five-year high of 6133.60, up 48 points. In the US, the Dow Jones powered ahead, climbing 51.3 points to 6132.7.

Copper miner Antofagasta, ahead 120p at 2468p, led the clawback after the metal broke through $3 a pound for the first time, while Xstrata put on 91p to 2087p.

Vague merger talk helped Smith & Nephew rise 17½p to 518½p with Johnson & Johnson said to be the possible buyer. The underlying business environment for S&N isn't too good. Confirmation from US rival Stryker of a slowdown in demand for knee and hip replacements should have a serious negative impact on S&N, but takeover hopes means investors are unwilling to sell. However, Collins Stewart analyst Navid Malim repeated his advice to clients to sell and retained a price target of 450p.

News the US Food and Drug Administration is to delay its decision on Shire's Adderall XR Citizen petition was received favourably by investors. Shire has asked the regulator to impose the same demanding standards for generic copies of the drug, which is used to treat attention deficit hyperactivity disorder, as it must meet.

Read about the stocks our small caps experts say are set to fly, or dive

The FDA today said it cannot make a decision at this time because of the complex issues surrounding the case. Shire rose 20p to 878p as the delay will mean it is free from competition for a while longer.

Bristol Water Group has agreed a 1060p-a-share cash bid from Spanish water and waste company Agbar, which values the whole group at £165m. Bristol Water shareholders will also be entitled to a special interim dividend of 22.5p a share, instead of the final Bristol Water dividend for the year. Agbar is a major company in the water sector in Spain and Chile. It also has water businesses in Mexico, Colombia and Cuba.

UK investment trust Ecofin Water and Power Opportunities has agreed to sell its 22.6% stake in Bristol Water to Agbar, which also has acceptances from Bristol Water directors and Axa, representing a total of 9.6%. Bristol Water shares closed 99p higher at 1064p.

Associated British Foods slipped 3½p to 803½p after Merrill Lynch advised clients to stop buying the stock. It switched its recommendation from buy to neutral, noting that its defensive characteristics appear to be weakening as sugar prices and energy costs rise. It warned that further acquisitions might provide some upside to its earnings estimates but would not be enough to justify the current target of 925p.

Reports that entrepreneur Robert Tchenguiz has hired Deutsche Bank to advise on a possible takeover of Mitchells & Butlers boosted the pubs group. Deutsche would be able to provide crucial debt to the bidding consortium after Goldman Sachs pulled out earlier this week. M&B was 4p better at 504p.

Eurasia Mining's share price more than doubled as it revealed a new platinum discovery in the Russian Urals. The shares shot up 4.38p to 8.13p after it told investors the first drill results suggest 335 milligrammes of platinum per cubic metre and an estimated total potential of 5.1m cubic metres. The platinum lies under mud, which has prevented its discovery before. Eurasia predicts cashflow from the project by the summer of 2007 and estimates production at 15,000 ounces a year.

Phil Edmonds' White Nile was forced to state it knew no reason for the sudden surge in its shares. The African oil explorer's stock market value has risen by nearly 50% in under a week. Today the shares closed 13p higher at 140p.

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