Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:01 EDT, 13 April 2007

The odds on Imperial Tobacco, down 30p at 2261p, succeeding with its £8.2bn bid for Franco-Spanish rival Altadis have lengthened considerably in recent days.

Not only has Imps had two offers rejected by Altadis, but it now seems it faces a rival bid from private-equity company CVC Partners, which has just broken off talks with Sainsbury. CVC is believed to have approached Altadis, maker of Gitanes and Gauloises cigarettes, within the past few days and may already be making plans to put together a consortium of bidders.

The £10.2bn takeover of Sainsbury, up 11½p at 534p, may be dead but property billionaire Robert Tchenguiz is continuing to increase his stake in the supermarkets chain. Earlier this week he raised his holding in the shares from 4.6% to 5.07%. He says his aim is to put pressure on the Sainsbury board to realise the value of its property portfolio of 750 supermarkets.

He points out Sainsbury has only £1.6bn of debt but is valued at more than £10bn. 'This is a real estate company with a retail business on the side,' he says. But ABN Amro does not believe a significant property release is possible without damaging operational and financial flexibility.

A strong turnaround on Wall Street overnight helped London to make a firm start and extend yesterday's gains. In another day of thin trading the FTSE 100 rose 46.0 to 6462.4.

Oil shares were to the fore, boosted by firmer crude prices on world markets. BP jumped 13p to 576p on turnover of more than 95m shares and Royal Dutch Shell put on 39p to 1737p. Some dealers also attributed their gains to some bullish comments from Citigroup.

Barclays touched 759½p on spurious rumours that it was about to drop its bid talks with Dutch rival ABN Amro and become a target itself for US investment bank JPMorgan. The bank later pared back its lead to trade 5½p off at 743½p.

The profit warning from ScS Upholstery left its shares nursing a loss of 40p at 356½p. The specialist sofa retailer reported a further drop in sales over the Easter weekend, which it blamed on the good weather. Numis Securities fears the news could have a knock-on effect on the likes of DSG International, down 1.6p at 166.5p, and Kesa Electricals, 2½p off at 340½p.

Woolworths rose 1p to 31¼p after a line of 9.51m shares went through on the ticker at 30.2p. Citigroup has repeated its buy rating on luxury goods retailer Burberry and raised its sights on the share price from 720p to 780p. The broker says the group's margins are healthier than most City forecasts would imply.

Gulf Keystone Petroleum rose ¾p to 69¾p after receiving a £208m cash offer from RAK Petroleum, an unlisted public company incorporated in the Ras Al Khaimah Free Zone. The offer price of 74p is somewhat lower than the 78p Gulf Keystone indicated it was discussing in February.

African Eagle Resources has signed a farm-out agreement with Pan African Mining Corporation for the exploration, development and exploitation of its five prospecting licences totalling 909 square kilometres in the Fingoe area of north-west Mozambique.

Under the agreement, Pan African has the right to acquire the Fingoe licences by carrying out and funding the exploration and development of them. The deal will allow African Eagle, steady at 10.62p, to focus on its core projects while enabling shareholders to benefit from any future increase in the value of the assets.

Morgan Stanley has repeated its overweight rating on Croda International, down 2p at 656p, but raised its target from 725p to 750p.

The broker said the higher target for the speciality chemicals producer implies around 11% upside, reflecting better-than-expected margins within the existing group before its acquisition of Uniqema from ICI last September.

The broker believes Croda's management is delivering on restructuring, having already successfully increased prices by 5% to 7% within Uniqema.

TAKING STOCK

BANKING AND FINANCE
Bear Stearns predicts Barclays will launch its bid for Dutch rival ABN Amro by Tuesday. The broker says the phoney war is almost over and expects the bid to be launched in the next two or three days. The market is expecting terms of between e33 and e35 a share, but they are more likely to be pitched towards the lower end of the range.

BUILDING AND PROPERTY
Local Shopping Reit is offering up to 92m shares at 174p a time. The residential property investor will use the proceeds to clear bank debts and fund acquisitions and future expansion. Joint chief executive Nick Gregory says: 'The Local Shopping Reit is expected to generate income with a gross annualised dividend yield of 4.75%.'

CONSUMER
Scottish & Newcastle has signed a licensing agreement to produce leading Russian beer brand Baltika in the UK. S&N, which owns 50% of Baltika parent Baltic Beverages alongside Danish partner Carlsberg, will begin producing the Baltika 3 brand under licence in the UK this year as part of an agreement which will run until 2021.

ENGINEERING
The Takeover Panel has given Sulzer until 27 April to launch its bid for Bodycote International. The Swiss industrial giant said last month it was thinking of making a bid after Bodycote had rejected an offer of 325p a share, valuing the group at £1bn. Sulzer has even gone so far as to postpone a share buyback.

HEALTH
Shareholders have given Fulcrum Pharmathe go-ahead to buy Unicus for £5m. The drug development and regulatory services specialist says the deal will allow it to provide additional services such as pharmacovigilance and product information management and expand its overall drug development capability.

INDUSTRIALS
Goldman Sachs has downgraded IMI from buy to neutral following the recent strong performance by the shares. The broker says IMI has outperformed the Eurotop 300 by 10% during the past three months and has now exceeded the broker's 12-month target price of 575p. The sale of the retail division provides scope for further outperformance.

LEISURE
M&G Investments, the fund management arm of insurer Prudential, has bought a further 1.58m shares in takeover target Sportingbet at 64.95p. It raises M&G's total holding in the online gambler to 31.5m, or 7.28% of the company. Sportingbet is the target of a bid approach from Austria's bwin Interactive Entertainment.

MEDIA
Irish printer of academic books Oakhill is appointing Peter Lynch as executive chairman. In return, Lynch will take a 20% stake. Oakhill will place 14.1m shares at 15 eurocents, of which Lynch will subscribe for 4.2m. Oakhill's biggest shareholder Ray McLoughlin will sell a further 5.2m shares ,or almost 10%, to Lynch.

NATURAL RESOURCES
Vane Minerals surged to record highs. The board is holding a strategic review so that it can maximise shareholder benefit from its uranium portfolio. Vane has raised £1m by way of a fixed-rate unsecured convertible loan note which will be used to finance fasttrack exploration and drilling at its North American uranium projects.

RETAIL
ABN Amro has downgraded J Sainsburyfrom hold to sell and slashed its target from 524p to 450p following this week's collapse in bid talks. The broker does not believe a significant property release is possible without harming the supermarket chain's operational and financial flexibility. There is limited scope to return capital to shareholders.

SUPPORT SERVICES
Biffa shares are trading well below their year's high of 354½p in the wake of last week's trading update. Merrill Lynch reckons they remain expensive and points to the absence of a trading catalyst and lack of substance in bid speculation. The broker has repeated its sell rating on the waste disposal outfit.

TECHNOLOGY
Bridgewell has repeated its overweight rating on Sage Group ahead of interim results on 9 May. Yesterday's trading update indicated full-year pre-tax profits of £255m, which the broker says is in line with expectations. It is also excited about the acquisition of Pro-Concept, Switzerland's largest software vendor.

TELECOMS
Deutsche Bank has upgraded Vodafone from hold to buy because the shares look cheap following their recent correction. They have fallen 10% since Deutsche downgraded the mobile phone operator in January, but the acquisition of India's Hutchison Essar should offset any downgrades of its European operations. The target is held at 155p.

TRANSPORT
Up-for-sale Spanish airline Iberia says it has not yet shown its books to privateequity bidder Texas Pacific and is insisting it names its partners. Iberia wants to know if a rival airline or other Spanish companies will be involved. Last night Iberia upped its attractiveness to bidders by announcing passenger numbers were up 5% in March.

UTILITIES
RWE the German owner of npower, said it faces significantly higher costs of producing electricity from its coal-fired generators in Germany due to tough new carbon emissions rules. RWE expects to suffer a shortfall in the number of emissions permits granted by the government under a new scheme.