Yesterday's trading: Mergers restore calm

By Geoff Foster for MailOnline
Updated: 04:08 EDT, 16 March 2007

Another mouthwatering batch of multi-billion pound corporate deals helped world stockmarkets regain composure after Wednesday's heavy falls on growing concern about a surge in US mortgage loan defaults.

The value of global deals in 2006 topped £2 trillion with private equity takeovers in the UK reaching a record £25bn. The way things are going, 2007 will beat even that and provide corporate financiers with bigger bonuses than ever, helping to keep London's luxury motor dealers and estate agents extremely busy at the end of the year.

Imperial Tobacco set the market alight with a jump of 175p to 2222p following long-awaited confirmation of its £7bn-plus offer for Altadis, the Franco-Spanish tobacco group, famous for its cigarette brands Gauloises Blondes and Gitanes, and the Montecristo cigar brand. Rumours of a merger were rife in late 2004 but talks broke down on price.

Confectionery giant Cadbury Schweppes touched 645p before closing 18p higher at 620p after it confirmed plans to demerge its drinks business, which makes Dr Pepper, from the rump of the historic chocolate business. Broker Evolution values the beverage business at £7bn and confectionery at £8.3bn. Activist Nelson Peltz is laughing all the way to the bank.

More than 59m shares in Sainsbury changed hands and the close was 12¾p better at 542¾p. They peaked at 557¼p before rumours that a £6 a share offer had been agreed was denied by both the supermarket's board and the CVC-led private equity consortium.

Adding more spice to the situation was news that Iranian entrepreneur Robert Tchenguiz has increased his stake to 3.5% from 3.2%. Awaiting an increased offer from Stefano Pessina and his friends at KKR, Alliance Boots improved 1p to 1012½p.

Relieved to see Wall Street's rally overnight from 136 points down to 57 up, market-makers confidently marked bluechips higher. Buyers then reappeared in the belief that the US sub-prime mortgage crisis has been overblown and the problem is very small for European banks.

The Footsie, at 6.133.2, joyfully retrieved 132.5 points of Wednesday's fall of 160.5 points, while the FTSE 250 rallied an impressive 275.4 points to 11,219.5.

After Lehman Brothers said that its sub prime mortgage exposure was well hedged via derivatives, and Bear Stearns added that defaults didn't threaten other businesses, Wall Street recovered 54 points more in the early stages.

Helping sentiment too was news of InterContinental Exchange's £5bn proposal to merge with the Chicago Board of Trade and Cisco System's £1.6bn cash acquisition of web conferencing company Webex.

Hedge fund Man Group advanced 34p to 526½p after buying back 2m of its own shares at 499.92p. Peter Clarke, deputy chief executive, bought 49,919 shares at 497.07p and finance director John Morrison 85,062 at 497.07p.

Leveraged buy-out speculation lifted Kingfisher 14½p more to 268½p. Higher commodity prices gave miners a lift. Antofagasta added 27½p to 475½p and BHP Billiton 59½p to 1049p. Amid stakebuilding speculation, Anglo American jumped 134p to 2488p, while Xstrata rose 124p to 2425p and Rio Tinto 133p to 2715p.

Aggregates giant Hanson, still strongly rumoured to be on Cemex of Mexico's shopping list, rose 33p to 803½p.

Extreme market volatility is meat and drink to spreadbetting firm IG Group so taking the view it should have made a few bob in recent days, buyers chased the stock 21¾p up to 289¾p.

Private equity investor SVG Capital soared 52½p to 904p following strong results. Net asset value per share climbed 24.2% to 859.2p per share and funds under management have grown to £2.2bn.

Better-than-expected annual profits and an outlook statement saying trading in the first two months of 2007 have been encouraging lifted-engineer Charter 49½p to 856p. Bridgewell says it is the key pick in the UK Capital Goods sector and reiterated its fair value of 1050p.

Profit-taking following pleasing interim figures left building systems group Eleco ½p cheaper at 92p.

Lorien rose 3½p to 71½p on expectations that entrepreneur and 40% - plus shareholder Bob Morton will shake the IT resources services specialist up. He has joined the board after his mandatory 40p a share cash offer via his Southwind family trust was allowed to lapse.

Dog of the day was Emblaze. It crashed 31½p to 73p on a dire trading statement which indicated a loss of not more than about £5m for the year to end December 2006. The loss arises because of a provision that will need to be made in Emblaze Mobile in respect of VAT repayments due from HM Revenue & Customs.

Broker Collins Stewart says HMRC is withholding VAT repayments from legitimate companies such as Emblaze while it investigates the activities of fraudulent companies and traders in the market.

• CSS Stellar, the talent management group whose clients include Kate Winslet, Keira Knightly and Ricky Gervais, jumped 2½p to 37½p following much better-than-expected preliminary results.

A major restructuring which began in 2005 has driven the strong earnings recovery. Full-year losses were slashed to £0.03m from £17.4m. Bridgewell upgraded its 2007 pre-tax profit forecast by 15% to £1.8m.