A new burst of bid speculation and some reasonable trading news helped the London market make a bright start to the week yesterday.
Oil giant BP added 10p to 545p on vague talk of a possible bid from rival Chevron, with one trader commenting: "The BP rise can't just be down to an increase in the oil price."
J Sainsbury was also in demand, up 2p to 526.5p on hopes that the private equity group stalking the supermarket, a consortium of CVC, KKR, Blackstone and Texas Pacific, would announce a 550p-a-share offer this week.
Elsewhere, building materials group Hanson rose 11.5p to 864.5p as Lafarge, the French group recently tipped as a predator, announced better than expected full-year figures.
Associated British Foods jumped 37.5p to 845p after reporting a good first half, lifted by its discount retail chain Primark and a strong profit performance from its sugar business. The company said like-for-like sales at Primark grew at around 4% during the six months, while sugar profits were "strongly ahead of last year". Jeremy Batstone at broker Charles Stanley reiterated his buy recommendation after the news.
Housebuilder Persimmon climbed 49p to £14.73 after it reported a 17.5% rise in full-year profits, and financial group Old Mutual was lifted 6p to 187.5p on the back of a 22% increase in full-year earnings. By closing time the FTSE 100 was 33.2 points better at 6434.7.
International Power, up 5.25p to 384.5p, benefited from news that private equity groups KKR and Texas Pacific had agreed to pay £23bn for US utility giant TXU. Broker Collins Stewart said one concern about International Power had been increased competition from new power plant construction in Texas, but now the TXU bidders have agreed to scrap eight of 11 planned power plants to get the approval of the environmental lobby. "This will underpin the recovery of profitability in the Texas market," said Collins Stewart.
Among the fallers, media group Pearson, owner of the FT, lost 12.5p to 820p as profit takers moved in after it reported a 19% rise in earnings but gave no further news on any disposal plans. Collins Stewart upgraded it from "take profits" to hold, but kept its 800p target.
Meanwhile, after a 10% rise on Friday, department store group Debenhams slipped 1.25p to 178.75p. The company has been suggested as another takeover target for private equity, or possibly the ubiquitous Icelandic investor Baugur.
Richard Ratner at broker Seymour Pierce said: "With no property, the business having already been squeezed and no easy exit for a purchaser, [a private equity bid] is unlikely. We feel that [the recent share price rise] is much more to do with the fact that trade is likely to have picked up in February, with probably only one week in negative territory. The chance of another profit warning is unlikely and the shares were too cheap, having significantly underperformed the market since flotation." He has moved from hold to outperform.
But rival broker Evolution Securities advised clients to sell and repeated its 160p share price target.
"The company faces a more difficult trading environment, is burdened with high debt and has a significant overhang of stock," said analyst Freddie George. "Marks & Spencer is preferred. It has reported much stronger like-for-like figures over Christmas, is a stronger brand, has the support of significant property assets and obtains almost 50% of its sales from food. M&S will also be announcing in the spring details of its internet arm, which is being developed in association with Amazon and should provide impetus to its share price." M&S added 1p to 689p.
Private equity group 3i was 8.5p lower at £11.75½ on talk it was planning a £400m bid for estate agent group Foxtons. The shares were also hit by broker UBS cutting its rating on the group from neutral to reduce.
One of the day's disasters was support services group Alfred McAlpine, down 137p to 476.5p. The 22% slump came after it admitted to accounting errors at its slate quarry which would hit profits in 2006 and 2007. It has suspended two senior managers from the slate business while it investigates. Some traders said the problems could leave the company vulnerable to a bid.
Among the other mid-caps, Bluetooth group CSR fell 29p to 772p after Goldman Sachs cut its rating on the stock from buy to neutral and set a 750p target. UK Coal added 28.5p to 517p ahead of results this week. John Whittaker, the property investor, holds 20% and is now free to make a bid for the company.
Lower down the market, Tangent Communications, whose major shareholder is former Carlton Communications boss Michael Green, made its first acquisition: digital marketing company Ravensworth. Tangent, run by Green's two nephews, made a failed bid for printing group St Ives last October. The City seemed unimpressed by the new deal, with the shares unmoved at 13.25p.
Mobile content group Blue Star Mobile rose 2.75p to 16.25p after its chairman, David Cromwell, bought more than 300,000 shares last week to take his holding to 2.73%.
Raider quiz
Investors snapped up shares yesterday in LPA Group, an Essex-based manufacturer and distributor of electrical components. The company issued an upbeat trading statement ahead of a lively annual meeting, which saw a motion to allow share buybacks rejected and corporate raider Andrew Perloff quiz the board over its property assets.
Late last year Mr Perloff launched a tender offer for 28.39% of the group at 25p a share, and ended up with 17.85% after the board advised investors to reject the move. The shares now stand at 41.5p, up 8.5p yesterday. One of the group's attractions is its property portfolio. Among its three freehold sites is its 1.5 acre headquarters at Saffron Walden, Essex, located in a prime residential area and worth several times its book value.