Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:01 EDT, 1 June 2007

The merger maniacs were piling into property group Hammerson today as rumours of bid interest from bigger rival British Land fired a few sparks into an otherwise dull day on the markets.

Vague bid talk was all it took to push Hammerson up 23p to 1615p. But volumes remained relatively light at just fourm shares, not enough to suggest a bid was imminent. Hammerson, rightly considered the most likely takeover target in the property sector, has a portfolio valued at about £6bn and a development pipeline of £5bn.

Last month, the market was thick with rumours that private-equity giant KKR was mulling a bid, but the talk proved groundless. Analysts suggested that, with the UK property market nearing the top of its cycle, venture capitalists would be loath to get involved, and a trade buyer was more likely.

The word is that an offer would have to be pitched at at least £17 a share, reflecting a total bid worth £5bn, but some think £22 is not unreasonable.

In the broader market, investors were encouraged by better-than-expected non-farm payroll data in the US. In London, the FTSE 100 closed up 55.3 points at 6676.7. In New York, the Dow put on 42.50 points to 13,670.10.

The thought of all those lovely pub estates in the UK being turned into real estate investment trusts (Reits) boosted the pubs sector. Rousing words on the theme from Goldman Sachs cheered Punch Taverns, 35p ahead to 1379p, while Enterprise Inns was up 3½p at 741½p. The broker has raised its target for Punch to a chunky 1530p from 1280p, arguing that despite the firm's decision not to seek Reit status immediately, the added value if and when it does convert makes it a compelling buy.

Engineer FKI remained resolutely above the 130p its unnamed suitor was offering last night on hopes the initial bid approach would tempt more buyers out of the woodwork. With four distinct businesses, FKI could be carved up and sold off, but it is saddled with £300m of debt and a big pension commitment.

Even if no other bidders emerge, analysts said 130p was just an opening shot. The shares rose above 140p, but then eased back to 137¾p, down ¼p, in the face of profit-taking.

Richard Caring, owner of the Ivy, flushed by yesterday's successful sale of his Strada pizza chain for £140m. today topped up his holding in Carluccio's. Caring snapped up 3% of the Italian cafédeli business less than a month ago. He has just added to that and now controls 5.1%, spurring fresh talkhe may bid for the company. Carluccio shares advanced 5½p to 220p.

Enthusiasm for Pennon ebbed away as speculators were warned the share price has raced ahead of reality. HSBC downgraded it to underweight from neutral, arguing that bid talk is overdone, and a look at the fundamentals is needed. The shares had risen almost 100p in the past two weeks but they were down 7½p at 668½p today.

Power generators supplier Aggreko rose 28¼p to 594p as it said 'extremely strong' trading would translate into a substantial improvement in first-half profits.

Biofuels, 4½p higher at 14¼p, led the small-caps as news emerged of a new debt facility with Barclays worth up to £7m.

TAKING STOCK: Market news at a glance

Banking & finance
Deutsche Bank has poached Betty Deng, a top Citigroup banker, to manage its operations in China. Deng was responsible for developing Citigroup's business in the country and its client roster of state-owned enterprises.

Building & property
Medsea Estates has raised £700,000 via a placing of sevenm shares at 10p. The estate agent says it will use the proceeds to provide further working capital, enhance its brand internationally and finance future acquisitions.

Consumer
Nestle, the foodmaker hit by a scandal over its sale of powdered milk to African mothers, today moved to bolster its ethical image by handing over a vacant factory in Cambodia to a charity that helps destitute women and children.

Economy
US manufacturing accelerated last month as orders picked up, a survey showed today, adding to the positive view of the US economy given by the earlier employment data. Manufacturers are gearing up to meet demand after cutting their stockpiles in the first quarter.

Engineering
Balfour Beatty today admitted it was embroiled in the OFT probe into alleged price-fixing in tenders for building construction. Galliford Try, Rok and other major firms have also said they are providing information to the inquiry.

Health
The US Food and Drug Administration has approved SkyePharma's asthma drug Zyflo CR, which uses the company's Geomatrix drug delivery technology. Critical Therapeutics expects to begin marketing Zyflo CR in the US in the autumn.

Industrials
Citigroup has maintained a hold rating for Premier Farnell with a 190p target. The electronics distributor's US results were better than expected with sales improving on a daily basis, and overall results are in line with expectations.

Leisure
Restaurant Group benefited from Tragus's £140m takeover of Italy's Strada chain. Panmure Gordon has repeated its buy rating on Restaurant and its 425p target. The broker points out the cost per restaurant read-through indicates scope for a 24% rise in the shares.

Media
Investec has cut the commercial radio group GCap Media from sell to hold and set a target of 190p following the shares' recent strong performance. It says the group is still lagging some competitors despite an upturn in trading.

Natural resources
Salamander Energy's chief financial officer Nick Cooper has bought 7300 shares, worth £14,948, at 204.78p apiece. This lifts his stake in the oil explorer and production company to 1.75m shares, or almost 2% of its issued share capital.

Retailing
Tesco faces a second strike by drivers at its Livingston, Scotland distribution depot in a dispute over changes to job contracts and union representation. The TGW section of the Unite union confirmed a 24-hour strike will be held next week.

Support services
KBC Peel Hunt reckons Ashtead is due a re-rating. Worries about the US economy have overshadowed its performance, but the plant-hire market in North America can grow and, says the broker, Ashtead can deliver significant profits growth. It repeats its buy rating.

Technology
Analysts were today singing Dell's praises on news of strong firstquarter profits growth and plans to cut 8800 workers. 'Michael Dell still has his magic,' said Charles Wolf, president of research house Wolf Insights of New York.

Telecoms
WestLB has downgraded Vodafone from hold to reduce while keeping its 155p price target. The broker argues the rise in the price during the past few days was not warranted by Tuesday's full-year results and bears more relation to talk of a takeover.

Transport
FirstGroup plans to cut the carbon dioxide emissions of its UK bus and rail operations by 25%. It also proposes to reduce emissions from First buildings, and to encourage staff to rely less on private transport.

Utilities
Pennon says it knows of no reason for the strong performance of its shares. They have risen more than 60% during the past year and JPMorgan reckons it is vulnerable to short-term profit-taking despite the impressive contribution from its waste business Viridor.