Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:07 EDT, 5 January 2007

Shares in ICI were changing hands at their highest in more than five years today as the City braced itself for a £7bn bid for the Dulux paint maker.

ICI helped lead blue-chips higher during the day as talk of a bid from Dutch rival Akzo Nobel gathered pace but closed down 2¼p at 458¾p. The Crown paint group has put its Organon drugs business up for sale instead of floating it separately. Bids for Organon are expected to reach £5.4bn, providing Akzo with the funding to launch an assault on one of the most famous names in UK business.

Broker Collins Stewart says: 'If Akzo can sell pharma then the chances of a bid for ICI significantly increase — it would be the clear favourite use for the cash'.

It reckons Akzo could offer up to 600p a share and urges clients to hang on for the ride. Rival UBS remains neutral on ICI but admits such a move would strengthen Akzo's decorative coatings business in Asia and Europe and gain a foothold in the US.

ICI last year sold its Quest subsidiary for £1.2bn, enabling it to reduce debts and tackle its growing pension deficit. That has made it attractive to would-be suitors.

Elsewhere in the market, the sell-off continued apace after another lacklustre performance overnight on Wall Street where the absence of an interest rate cut continues to weigh heavily on sentiment. The FTSE 100 index fell 66.9 to 6220.1.

Utility companies came under the hammer ahead of publication next week of the findings of an EU investigation that has focused on government subsidies and anti-trust abuses, and is likely to call for tougher conditions to be imposed on takeovers and mergers.

This would particularly affect UK companies, which have been heavily targeted by their European rivals in recent years. Scottish and Southern fell 54p to 1491p, International Power 17¾p to 357p, United Utilities 15½p to 764½p and National Grid 17p to 720p.

They may have also been depressed by a weaker oil price, which earlier this week slumped to its lowest in more than a year. The price was steadier today but oil companies again came under selling pressure. Royal Dutch Shell fell 49p to 1732p and Cairn Energy 45p to 1670p. Among second-liners, Venture Production lost 38p to 789½p, Dana Petroleum 25p to 1152p and JKX Oil & Gas 17½p to 270½p.

Fashion retailer Next jumped a further 84p to 1940p as brokers continued to reflect on yesterday's Christmas trading update. Broker ING has raised its recommendation from hold to buy but says weak like-for-like sales continue to cause concern. Rival broker HSBC has raised its sights from 2050p to 2170p and repeated its overweight rating.

Reed Elsevier jumped 11p to 578p, reviving talk of a bid from German rival Wolters Kluwer or from a private-equity company. Some dealers say the talk is fanciful, but more than 8m shares changed hands.

Ark Therapeutics' final-stage trials of an experimental drug to treat brain cancer have been given the thumbs-up by Europe's medicine regulator to continue without modification. Cerepro is already being assessed by the regulators for marketing approval, and the outcome should be known by the end of March. Ark shares advanced 3½p to 106p.

Mickey Clark's market at a glance...

CONSUMER

Carphone Warehouse, supplier of mobile phones, landlines and broadband, updates the market on Christmas trading a week today. Broker Numis has made it one of its picks of the year and says there is plenty of upside for profits.

ECONOMICS

Strong US employment data today poured cold water on expectations of an imminent fall in American interest rates. Employers hired an extra 167,000 workers in December and people's pay increased by the most for eight months.

ENGINEERING

Steel contractor Cleveland Bridge has won the right to appeal against legal defeat by Multiplex over the construction of Wembley. Nest week, Wembley faces designer Mott MacDonald in court over design changes, says Building magazine.

HEALTH

The US Federal Trade Commission has fined the marketers of
weightloss pills, including Xenadrine EFX and One-A-Day Weight Smart, millions of dollars for making false advertising claims. The products will remain on the shelves.

INDUSTRIALS

Building products suppliier Wolseley nudged back towards 1300p for the first time since May, reviving hopes that a bid from French rival Saint-Gobain may be imminent. Brokers say Saint-Gobain would have to offer a generous premium.

LEISURE

Games maker Games Workshop today issued a profit warning after sales in the six months to November fell £2.3m to £54.8m. Full-year profits will be below forecasts, it said. Pre-tax profits for the half-year were almost flat at £127,000 and the interim divi is held at 4.95p.

MEDIA

Altium has downgraded publisher Bloomsbury from reduce to sell following last month's bearish update. Investors should look beyond any share price spike from the next Harry Potter book to the prospect of pedestrian earnings growth.

NATURAL RESOURCES

Director Eddie Smith has raised his stake in Aussie oil explorer Carpathian Resources by picking up 430,000 shares, taking his holding to 19.6 million, or 14.6% of the company. The price fell sharply last month after a bad gas drilling report.

RETAILING

Tesco's international ambitions suffered another blow today after Slovakia's anti-monopoly office blocked it from taking over four Carrefour stores in the country. It said the deal would make Tesco too dominant there.

SUPPORT SERVICES

Booming markets helped boost sales at investment bank data company Dealogic. The analytics division's turnover grew 20% and IBRM, the investment banking relationship management arm, was up 10%. But spending on expansion shrank operating profit margins.

TECHNOLOGY

The London borough of Hillingdon has awarded software specialist Northgate Information Solutions a five-year contract worth £4 million to provide hosting arrangements for its financial systems.

TELECOMS

Cable & Wireless raced to a fouranda-half year high after a visit to the telecom operator by Investec, which was said to have been behind the buying. The broker appears to have been impressed but already has a buy rating and 177p target.

TRANSPORT

Docklands Light Railway operator Serco is making preparations for a near-four-mile extension of the network to the new Stratford International rail terminal and the Olympic Park centrepiece of the 2012 Olympics. It is due to open in 2010.

UTILITIES

ABN Amro was behind the fall in Centrica after downgrading shares of the British Gas group from buy to hold. The broker also slashed its earnings forecast for 2008 by 8% to 25.9p a share and for the following year by 8% to 28.4p to account for gas production concerns.