Market report: Monday close

By Mickey Clark for MailOnline
Updated: 12:09 EDT, 19 February 2007

A fresh wave of speculative buying carried shares of J Sainsbury higher again today, with the City gambling on the possibility that more suitors will emerge.

The price of the supermarkets giant rose a further 8¾p to 512¾p as more than eightm were traded. The speculators are waiting to see if Marks & Spencer's chief executive Stuart Rose is ready to step up to the oche with an offer approaching £11bn for the UK's third-biggest superstores chain.

The board of M&S, up 1½p to 694p, has already conceded it has looked at Sainsbury's. Weekend reports claimed Rose has held talks about financing the deal with the £20bn Qatar Investment Authority, which has connections to the Qatar royal family. But the M&S board has been quick to play down this story.

Earlier this month, a consortium of private-equity companies, which included CVC Partners, Blackstone and Kohlberg Kravis Roberts, expressed an interest in bidding. Word is it may be prepared to offer 550p a share. But a move by another privateequity outfit, Cinven, to enter the fray ended after its partner Texas Pacific joined the CVC consortium.

Share prices generally continued to be squeezed higher in thin trading. The FTSE 100 index closed rise of 24.9 at 6444.4. Wall Street was closed for a public holiday today while the Chinese celebrated their New Year. That left Tokyo to make the early running, and blue-chips there posted some useful gains.

Barclays, steady at 781½p, kicks off the bank reporting season for real tomorrow, with the focus likely to be on provisions for bad and doubtful debts. A profits warning from HSBC, ½p off at 913½p, earlier this month revived the debate about debt levels among the lenders, although much of the blame in the HSBC case was attributed to its US operation. Analysts say the banks will still have done well last year, and collectively should produce pre-tax profits in the region of £40bn.

Meanwhile, Lloyds TSB, up 1p at 606½p, is reckoned to be putting its Abbey Life insurance subsidiary up for sale with an expected price tag of £1bn in an attempt to offset losses in the struggling division.

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Reed Elsevier, which last week agreed to sell off its educational publishing business, fell 11½p to 624½p. It has been downgraded from buy to hold by US brokerage Citigroup, which has also raised its target from 600p to 650p. Citigroup points out that the jump in share price that greeted Reed's announcement looks to have fully valued the still-strong fundamentals of the business.

United Utilities fell 4p to 766p after being downgraded by US broker Goldman Sachs from neutral to sell, with its target cut from 554p to 520p on valuation grounds. More than 22m EMIshares changed hands as the price rallied a further ½p to 221½p. City speculators believe EMI remains vulnerable to takeover following last week's shock profits warning - its second this year.

A story now doing the rounds claims the music publisher is examining a radical plan to borrow £1bn against its publishing business, which manages the rights to more than am songs, including The Beatles. There is also talk that Warner Music is again casting an eye over EMI.

Last year, EMI rejected a £2.54bn, 320p-a-share offer from Warner and claimed its own $2.41bn (£1.23bn) offer for Warner remained the best option for both sets of investors.

Computer services group Logica-CMG firmed 5¼p to 176½p after Deutsche Bank raised its rating from hold to buy.

Enterprise stood out with a jump of 53p to 584p after confirming that it is in bid talks. Venture capital group 3i is proposing an offer worth 605p a share for the cleaning and maintenance group. Brokers say it reflects a fair price for the business, but do not rule out the possibility of another bid.

TAKING STOCK: Sectors at a glance

BANKING & FINANCE
Specialist mortgage lender Kensington Group said today that it is reviewing its 'strategic options' - seeming to confirm speculation that it is considering a sale of the business. The company, which has been subject to takeover talk for some time, said there was 'no certainty' that the review would lead to a deal.

BUILDING & PROPERTY
Goldman Sachs has removed British Land from its Conviction Buy list following full-year numbers. It chooses to focus elsewhere in Europe. Land remains on its buy list because it believes the management can drive rental value growth, resulting in higher returns in the long run. But the price has risen 34% since last June.

CONSUMER
SSL International attracted speculative support on Friday, following claims L'OrÈal may sell its stake in Sanofi Aventis and use the proceeds to buy the Durex maker. Johnson & Johnson and Procter & Gamble have been the subject of SSL bid talk in the past, but they were put off by the fact the group does not own the Scholl brand in the US.

ENGINEERING
Engineering group Amec reached the end of the line in the rail industry today after agreeing to sell its 50% stake in Amec Spie rail systems to French infrastructure company Colas. Amec's disposal - for an undisclosed price - marks its exit from the sector after working on major projects such as the £8.3bn West Coast Main Line upgrade.

HEALTH
Superbug fighter Tristel today reported a 23.4% rise in half-year profits to £404,000 after sales jumped 44% to £2.57m. The company, which fights bacteria in 375 hospitals across Britain, said it will improve its performance further by moving manufacturing of all its products to a new base in Newmarket.

INDUSTRIALS
BAE Systems and warship builder VT Are close to securing a £1bn deal to create a national shipbuilding giant. The proposed tie-up, expected in the next five weeks, will join VT's shipyards in Portsmouth with BAE's on the Clyde. It will enable the Ministry of Defence to give the go ahead for a £4bn aircraft carrier project.

LEISURE
A recent trading update from Domino's Pizza made encouraging reading. Full year numbers out tomorrow will see 2006 pre-tax profits rise from £9.7m to between £13.5m and £14m. Charles Stanley expects the dividend to grow from 61.5p to 8.3p. It attributes the progress to new products and increased franchising.

MEDIA
EMI is considering selling its recorded music division in an attempt to fend off calls for it to be taken over. The troubled company is in debt to the tune of £1bn, and needs to raise cash to pay down debts and strengthen its balance sheet. Private-equity houses are rumoured to be pondering a bid.

NATURAL RESOURCES
ReneSola expects 2006 profits to be between $22m (£11.5m) and $23m. The maker of solar wafers says its expansion programme will accelerate rapidly this year to take advantage of growing demand. Hanson Westhouse says clients should view any weakness in the share price as an excuse to buy.

RETAILING
John Lewis is to create 35,000 jobs as part of a 10-year business plan that will result in turnover doubling to £12bn a year. It said the plan would see it 'significantly increasing' its 26 department stores and 184 Waitrose supermarkets. Analysts say the expansion will pose a threat to rivals House of Fraser, J Sainsbury and Marks & Spencer.

SUPPORT SERVICES
Enterprise confirmed it is in talks with private-equity firm 3i over a potential £486m takeover deal, sending the shares up sharply. The maintenance and support services firm said there was "no certainty" the offer would succeed. The shares moved up nearly 10% to 580p, still short of the possible 605p deal from 3i.

TECHNOLOGY
MTI Wireless, which makes antennae for wireless broadband, doubled its pre-tax profits to $3.8m (£1.9m) last year after sales jumped 41% to $16.5m. It was the firm's first set of full-year results since it listed on AIM in March, raising £7m. Chief executive Dov Feiner said it was a 'landmark' year.

TELECOMS
Mobile phone ringtones specialist Monstermob said it will continue to recommend Spanish firm LaNetro Zed taking a stake despite interest from China's Linktone. Monstermob has said it would be prepared to recommend a $78m (£40m) bid from Linktone but if no offer is made it will stick to the deal with LaNetro Zed.

TRANSPORT
Rolls-Royce, the world's second-largest aircraft engines maker, won a £45m pound order to build six ships for Companhia Brasileira de Offshore and two for Chile's Asnavales. The Brazilian company ordered four 3000-tonne ships, which will be built by the Allianca shipyard near Rio de Janeiro for delivery in 2009 and 2010.

UTILITIES
Norsk Hydro will report fourth-quarter results tomorrow that will be down by about a fifth because of write-downs of the Norwegian company's aluminium and energy assets. They will overshadow the $30bn (£15.2bn) deal to sell its oil and gas interests to another Norwegian company, Statoil, in December.