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Yesterday's trading: Whitbread tops menu

By Geoff Foster for MailOnline
Updated: 02:52 EDT, 10 January 2007

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Professional punters searching for the first mega takeover target of 2007 nibbled away at Whitbread.

Shares in the owner of Premier Travel Inn, Brewers Fayre, Beefeater, Costa Coffee and David Lloyd Leisure touched 1713p before closing 7p off at 1695p.

Those who jumped ship before the close could be jumping back in today because American property investor Starwood Capital is understood to have increased its stake via the French bank Credit Agricole from 4% to 8%, or 17.7m shares.

Rumours were rife in November - when SC, run by founder Barry Sternlicht, first bought a near-3% shareholding - that it had hired top investment bank JP Morgan to advise on a £4bn-plus cash bid for Whitbread, worth around 1850p a share.

Nothing has yet materialised but Starwood wants to get into the UK market and the 470-strong Premier Travel Inn chain would give it the premium UK brand in budget hotels.

Whitbread has sold a number of troublesome businesses and management is currently in discussions with potential buyers of TGI Fridays. An announcement is expected before the end of the financial year in March.

With the introduction of tax efficient Real Estate Investment Trusts, the group has also said it will be reviewing its property structure in the first six months of 2007.

Clients of Morgan Stanley switched on to BSkyB after the US broker upgraded to overweight from equalweight and lifted its target price to 600p from 525p. Shares of the satellite broadcaster jumped 21½p to 544½p.

Morgan believes 2007 should be the year in which BSkyB proves that the roll out of broadband will help it grow the subscriber base, lower churn and increase average revenue per user.

The Footsie slipped on an oil slick and lost a 24-point gain to close only 1.9 better at 6196.1.

BP lost 17p to 535½p after revealing it's oil and gas output had fallen 5% in the fourth quarter. That dragged Royal Dutch Shell 19p lower to 1694p. Meanwhile Cairn Energy closed down 44p at 1681p after the £1bn flotation of its Cairn India business flopped in a big way. So it was a depressing day all round for the sector.

Making matters much worse was a further $2-a-barrel fall in the oil price to an 18-month low of $54 as traders continued to fret about the abnormally warm weather in the Northeast of America which has weakened demand for energy.

Up 40 points at the outset, Wall Street was soon trading that much lower following a profits warning from telecoms giant Sprint Nextel. It expects 2007 profit and revenue to come below analysts' forecasts, and staff will be cut to save costs.

Lower fuel costs and continuing talk that a bidder could pounce now that it has reached an agreement with unions on its pension deficit problem helped British Airways fly 15p higher to 559½p.

HBOS jumped 33p to 1165p as Citigroup made it its key pick in the banks sector. Buying on reports of a pending bullish circular puffed Imperial Tobacco 50p higher to 2082p.

Strongly supported of late on Akzo Nobel bid speculation, ICI rose 9¼p to 460¼p on comments from Merrill Lynch. The broker says that with its streamlined portfolio, lower pension deficit and net cash, the former Bellwether is a definite takeover target.

Profit taking following the third-quarter trading update left Marks & Spencer 29p down at 696p. Rumours of an institutional seller of 27m shares at 697p did the rounds afterhours and does make one wonder whether the party is finally over for chief executive Stuart Rose & co.

Revived whispers of a £5-a-share cash bid from URS Corporation of the US accompanied a 21p rise to 461¾p in professional support services group Mouchel Parkman.

Filtrona, the plastics and fibre products group, shed 7p to 254¼p after Citigroup placed 17.5m shares at 252p a share with various institutional investors.

Industrial engineer Severfield-Rowen soared 215p in a thin market to 1655p after management said it expects 2006 pretax profits to be 'materially ahead' of current market forecasts. Dealers had feared the worst after directors unloaded stock in November.

• Cash-rich international payment services provider Datacash rose 7p to 183p as Investec upgraded to buy from hold following a good trading update.

Analyst Guy Hewett has downgraded 2007 to £11.5m from £13.2m to assume US gambling transactions fade to zero following the legislation passed in the US, but says the rapid rise of e-commerce continues and the company is benefiting strongly from this.

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