Telecoms group Cable & Wireless was in the spotlight today on suggestions the company could be broken up.
The idea would be to split the UK and international businesses and sell them to separate private equity groups or other telecoms companies. "The UK operation could be attractive to a European incumbent or to private equity," said Mike Jeremy, an analyst at Daniel Stewart. "The management team is known to have strong incentives to achieve annualised 8% plus growth. Overall, if completed, a break-up would add momentum to the sector consolidation trend."
Meanwhile Citigroup raised its price target on the shares from 190p to 240p, adding that on a two-year view, the continuing restructuring of the group could see the shares move above 300p. A demerger could add another 142p to that, it said.
"With around 50% of the stock held by less than 20 institutions the scramble for exposure should continue," said Citigroup.
But the company played down the talk, saying any discussion about a spin-off was premature and maintaining there was nothing to report concerning private equity approaches.
The shares - even thought they came off their best levels - still ended 4.4p higher at 185.6p.
Elsewhere miners moved higher after workers in Peru began their first national strike in three years, with Xstrata up 35p to £26.41 and BHP Billiton 4p better at £11.29 after ABN Amro raised its price target from £13.50 to £13.80.
Fashion retailer Next climbed 46p to £23.49 after Morgan Stanley upgraded from equal weight to overweight, while pubs group Punch Taverns was wanted ahead of results tomorrow, up 34p to £13.04.
International Power was lifted 14p to 440.25p as two sets of analysts, at Lehman Brothers and Collins Stewart, made positive noises.
But brewer Scottish & Newcastle was the biggest faller in the FTSE 100 index, down 8p to 617p as profit takers moved in after its recent takeover-fuelled surge.
Intercontinental Hotels was 7p lower at £12.16 as Credit Suisse downgraded from outperform to neutral on valuation grounds. The bank said any bidder would face demanding targets to achieve a good return from the investment.
But Credit Suisse did increase its price target from £11.30 to £12.60. "This is based on our sum of the parts valuation whereby we value the company's 25 owned hotels at £1.65bn, against a book value of £1bn," said the bank. "Management have stated these assets will be sold."
Credit Suisse also did some damage to BAE Systems, which lost 3p to 457p after the bank cut its earnings forecasts for 2007 and 2008.
Talk in the market is that BAE will pull out of the bidding process for Devonport, the nuclear submarine maintenance yard, leaving Babcock International as the sole bidder. Final bids are due to be in to the Ministry of Defence by the end of the week, with a price tag of around £350m expected to be put on the business. Analysts at Numis said Babcock may need a rights issue to fund the deal, leaving its shares 5.5p lower at 441.5p.
Among the mid-caps, engineer Bodycote fell back sharply, as expected after Swiss rival Sulzer withdrew its bid approach after the market closed on Friday. Bodycote slumped 29p to 296p.
But Harry Philips at Evolution Securities repeated his buy recommendation with a 350p target. "The stock will come under pressure today but it is inherently cheap at current levels and an opportunity to buy it at around the 300p level is not one to be missed," he said, but added: "Hot money will have to come out and this will weigh on the stock in the next few days."
Elsewhere plastics and fibre group Filtrona added 9p to 290p after reporting an encouraging first-quarter performance, while engineer Tomkins was up 3.5p to 266p on talk it could be a good target for private equity.
Retailer Mothercare added 27.75p to 434p after paying £85m for Early Learning Centre, news which prompted a buy recommendation from KBC Peel Hunt.
Overall the FTSE 100 closed 30.5 points higher at 6449.2, with the FTSE 250 25.9 points better at 11,929.4.
"It's been very Mondayish," said one trader. "It's the last day of the month, everybody just wanted to get it out of the way and then push on."
Lower down the market Wyatt Group soared 8.5p to 15p after the consultancy group said it expected to make a significant improvement in trading this year compared with the previous year's loss-making position.
Dentistry group Oasis Healthcare, which said on Friday it had received a number of bid approaches, added this morning that it had rejected one of them which was pitched at 60p a share. It said all the other proposals were higher than that. In the market its shares added 6p to 61p.