Investors faced a volatile time yesterday, with continuing interest rate worries, new takeover developments and a host of brokers' notes arriving in City inboxes.
Anyone holding shares in Enodis, which makes kitchen equipment for McDonald's, was feeling burned. The shares have run up sharply recently on hopes the company would be taken over by one of two US rivals.
First came a 195p-a-share offer from Middleby, which was topped by a 210p cash bid from food services business Manitowoc. When Manitowoc raised its offer to 220p, valuing its target at £892m, Enodis agreed to let the company look at its books. But after the market closed on Tuesday night, Enodis said the two sides had been "unable to reach a mutually acceptable solution that ... satisfactorily addresses certain regulatory risks."
Middleby is still around but has said it would not make a hostile offer. Enodis shares plunged 37.5p to 179.5p, a 17% drop.
Still on the takeover front, leisure group Rank added 7p to 207.5p on talk the company was undervalued and vulnerable to a bid. Broker UBS has said the shares could be worth 240p.
Lower down the market came a real bid. Telecoms group Fibernet jumped 13.5p to 52.5p as it confirmed it had received an approach. The company recently revealed an error in the way some costs associated with three contracts were accounted for, which would knock £700,000 off full-year earnings. The subsequent fall in its share price, and the fact it has about £13m of cash in the bank, has made it attractive to a predator, said analysts. The talk was of a bid of about 70p a share, possibly from a private equity house or a US operator. Bridgewell analysts said possible predators could be a British rival or US telecoms groups with a UK presence, such as Level 3, Global Crossing or MCI.
Overall, the market was caught in a two-way pull. Tuesday night's decision by the US Federal Reserve not to raise interest rates was partly welcomed but also stoked fears that growth in the American economy was weakening, which would hit company profits.
On top of that, the Bank of England's Inflation Report yesterday seemed to suggest there may be a need for UK interest rates to rise again before the end of the year. But analysts said the report did not seem unduly hawkish.
By the close, the FTSE 100, which had been all over the place during the day, managed a 42.4 point gain to 5,860.5. Sentiment was helped by a positive start on the US markets after stronger than expected results from technology group Cisco Systems and entertainment group Walt Disney.
Software group Sage edged up 0.25p to 222.25p after announcing the £297m acquisition of the Florida-based Emdeon, which provides computer services to doctors' practices. Analysts were not overwhelmingly positive on the move. Bridgewell said: "This is a new area of business ... for Sage and effectively brings it into competition with [software rival] Misys in ... a market that Misys views as a slow growth area."
South African technology group Dimension Data added 1.5p to 33.5p in the wake of the Cisco results, while Unite, which provides student accommodation, rose after broker Merrill Lynch repeated its buy recommendation and said the shares could be worth 482p.
British Airways was 11.75p higher at 390p as UBS raised its price target from 420p to 500p. In a 28-page note, UBS raised its estimates for 2008 profits by 16% - 20% above the market forecasts. "We think the consensus earnings forecasts will have to rise," said UBS. "Our new price target is based on discounted cash flow valuation and assumes a settlement with the unions on pensions."
Barclays added 11p to 644p as Deutsche Bank increased its valuation on the shares from 710p to 750p and advised clients to buy.
Insurer Resolution added 7p to 567p as it announced a 95% take-up for the rights issue to fund its purchase of Abbey National's life insurance business. The rump of the shares were successfully placed by Citigroup and Goldman Sachs at 563p a share.
Technology recruitment group Spring added 1.5p to 51.75p after Peter Searle, who joins as chief executive on October 1, spent £500,000 on shares in the firm at 49p. The company has agreed to match the purchase of these 1m shares, which will vest three years after he joins.
Finally, more fun and games at Regal Petroleum, up 1p to 84p. Regal has sold 15% of its subsidiary RPC, the holding company for its controversial Ukrainian licences, to a British Virgin Islands-registered company, Alberry, for £100,000. Under the deal, if Alberry wins a forthcoming court case over Regal's rights to the licences within 15 months, Regal will buy back the 15% stake for a staggering $51m in cash or shares. If Alberry fails, Regal will buy it back for £50,000 in cash. Exactly who is behind Alberry was not clear. All Regal's directors were said to have "gone out for a meeting" when contacted yesterday, although sources close to the company said Alberry was a Ukrainian entity brought on board to help win the legal battle after Regal lost the preceding three court cases.
Printing problems
The problems of doing business in China were again illustrated yesterday, this time by inkjet printing specialist Xaar. The company said some Chinese customers, accounting for 15% of revenues, were being investigated by the country's customs authorities over alleged non-payment of import duty. The investigation is being coordinated by central customs not local officials, as Xaar originally thought, which means it is likely to take much longer. "This is likely to increase ... its impact on current trading, which remains below expectations," said the firm. Teather & Greenwood said: "This looks bad to us. In our view, this stock is clearly not a buy until this situation is resolved." Panmure Gordon slashed its target from 250p to 140p. Xaar fell 37.75p to 117.25p.