Market report: Monday close

 

ANGLO-SWISS mining giant Xstrata's $15bn (£8.2bn) bid for competitor Falconbridge have been thrown into doubt after the Canadian company accepted the terms of a rival bid.

The American giant Phelps Dodge has delivered a knockout blow by bidding $40bn for Falconbridge and another of its suitors, the Canadian mining firm Inco. The deal has the backing of all three boards and will create the biggest miner in the US, with more than 40,000 employees.

It will also make it the second-biggest producer in the world of copper and molybdenum - a mineral used to toughen steel - and the biggest producer of nickel.

The combined company would rival the likes of Rio Tinto, up 9p at 2810p, and our own BHP Billiton, 3p better at 997p.

Xstrata currently owns 20% of Falconbridge and has been wrestling with Inco for control of the rest of the shares. The takeover by Phelps Dodge will require Inco to complete the acquisition of Falconbridge by increasing its offer to $48 a share.

This would, in turn, guarantee Xstrata a healthy premium on its stake, helping its own shares to jump 17p to 1955p on news of the deal with Phelps Dodge.

Good news for the other mining companies followed from the weakness of South African rand. Anglo American jumped 30p to 2138p, Lonmin 44p to 2743p and Vedanta Resources 11p to 1312p.

An early assault by blue-chips on the 5700 level soon petered out. The FTSE 100 index was left nursing a fall of 10.9 at 5681.2. Much of the attention was focused on secondliners, where investors were cheered by the proposed £700m-merger of gambling outfits Stanley Leisure, up 7½p at 642½p, and London Clubs International, unchanged on 107p, as well as the appearance of another possible bidder for DeVere hotels, up 33½p at 848p, and Balfour Beatty's £32m acquisition of Birse, 2¾p better at 16¼p.

Shire initially helped blue-chips higher with a rise of 16p to 770½p amid hopes that the UK's third-biggest drug maker could soon find itself on the receiving end of a bid. Weekend reports linked Shire with Swiss biotechnology specialist Serono, which is on the lookout for suitable acquisitions and has a whopping £10bn war chest.

The two companies vied for control of Transkaryotic last year - a contest Shire won. But US investment bank JPMorgan has added a word of caution, suggesting Shire's Adderall, a treatment for childhood attention-deficit disorder, might be a stumbling-block to any Swiss move.

But JPM concedes Shire has a follow-up product to Adderall, expected to have significantly less abuse potential. At these levels Shire is valued at £3.8bn.

Marks & Spencer stood out with a rise of 12p to 578p on the back of reports that boss Stuart Rose had been talking to brokers in Paris last week, and repeated his optimistic comments about prospects.

Whispers in the trade say the retailer has also indicated its summer sales will start a week later than normal, suggesting stock levels are under control.

More than 8m Corus shares changed hands but the price closed 2¼p lower at 428½. It follows news over the weekend that Arcelor had agreed a £18.6bn merger with Mittal Steel. Now further mergers in the steel sector are expected.

In Australia, Onesteel and Smorgan are pondering a possible tie-up, and City speculators are wondering how long it will be before someone turn their attention to Corus.

Online pollster YouGov jumped 41½p to 455p after telling the City that profits for the full year to 31 July would top expectations following strong trading in the UK and Middle East.

Also on Aim, pre-tax profits at white-collar outsourcing supplier Supporta, 1½p better at 86½p, soared from £590,000 to £1.94m last year before write-offs, tax and interest payments. Once all that is taken into account, profits were down from £870,000 to £260,000.

Chairman John Jasper said he is pleased with the overall performance and that a restructuring of the group had produced three clear divisions, each of them 'profitable and cash-generative businesses'.

Aim-listed Albidon firmed 2p to 41p after signing a development agreement with the Zambian government relating to the Munali nickel project.

Andrew Flanagan, chief executive of Virgin Radio owner SMG, down ¾p on 81¾p, has bought 25,000 shares in the company at 79½p, taking his holding to 3.16m shares, or 1%.