Market report: Monday close

By Mickey Clark for MailOnline
Updated: 12:20 EDT, 30 July 2007

ICI raced to a new record high of 619½p before falling back slightly to close up 41.5 at 618½p after receiving an increased offer of 650p a share from Dutch rival Akzo Nobel over the weekend.

But, just like Oliver Twist, the Dulux paint group says it wants more for its shareholders and has rejected the latest terms, claiming they fail to recognise the 'full strategic value of the company'. Both sides are continuing to talk and ICI's management hopes it can persuade the Akzo board to be a little more generous.

Broker Collins Stewart says competing bids for ICI appear unlikely and the company's fair value price is 525p.

Analyst James Knight says: 'We think most ICI shareholders would accept 650p. Either ICI's board gives in to 650p, or Akzo goes hostile.

He points out that Akzo Nobel shareholders have a veto on any deal, amid increasing hedge fund and activist involvement, and 650p is at the upper end of the range which would be acceptable.

At 650p, ICI boasts a price tag of £7.66bn. Its share price has shot up from around 391p since November last year, when it sold off its Quest starches business for more than a £1bn. That disposal sparked off the subsequent run of takeover speculation.

Shares generally rallied from opening falls. The FTSE 100 index, which ended 307 points down last week, fell 9.1 to 6,206.1. But with the school holidays in full swing, turnover levels are slowing to a trickle, which means investors can be assured of another volatile week.

Wall Street made a nervous start this afternoon as investors tried to claw back some of last week's heavy losses. The Dow rose 18.54 points to 13,284.01 despite the emergence of another casualty on the debt market.

Mining shares helped to limit the damage, with Vedanta Resources up 83p at 1701p and Rio Tinto 113p better at 3451p.

Cadbury Schweppes ran into fresh selling, with the price falling 8½p to 595p, making it one of the worst blue-chip performers. Speculators hoping for news about the disposal of its US soft-drinks business have been disappointed. The credit crunch in the debt market has forced the group to cut the asking price for the business by £1bn to £7bn already. Private-equity bidders may also be put off by rising interest rates.

Emap fell 22p to 836p. The magazine publisher and radio broadcaster says it has received unsolicited offers for various parts of the business.

Credit Suisse has begun coverage of Soco International, up 129p at 1894p, with a neutral rating and 2000p target. The broker feels Soco's visible exploration and development potential is fully priced in. The move coincided with a bullish drilling update of its Te Giac Den exploration well offshore of Vietnam. The group says it has struck oil and suspended drilling.

Almost 190m Xansa shares changed hands as the price surged 22¼p to 126¼p. The group has received an agreed offer worth 130p a share (£456m) from French IT services company Group Steria. A single line of 41.9m Xansa changed hands at 130p.

Vislink, down 1¾p to 79¼, has bought Focus Communications Inc, trading as Western Technical Services, for up to £2.7m in cash.

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TAKING STOCK: Market briefs

Banking & finance
The Big Five High Street banks report figures this week, but much of the focus will be on Barclays on Thursday and Royal Bank of Scotland on Friday and their bitter battle for Dutch rival ABN Amro.

Building & property
RBS is thought to be holding talks about selling the 466-bedroom Grosvenor House Hotel on Park Lane for as much as £650m - or £1.4m per bedroom. Grosvenor Housewas bought by RBS in 2003.

Consumer
Panmure Gordon repeated its buy recommendation on car dealership Inchcape before half-year results this week. Analyst Mark Allen said share price weakness was overdone as Inchcape looked towards growth in emerging markets.

Economy
The Bank of England is expected to leave interest rates unchanged this week after imposing five quarter-point hikes since last August. 'We are adamant that the Bank will leave official rates unchanged at 5.75%,' said Investec economist Philip Shaw.

Engineering
Credit Suisse has upgraded Rolls-Royce to outperform from neutral and raised the target price to 580p from 570p after 'high-quality' results for the first half. Last week Rolls said sales rose 10%, sending profits up 17% to £380m.

Health
Shire Pharmaceuticals, Britain's third-largest drugmaker, has been upgraded by Citigroup, Credit Suisse and Lehman Brothers after a 31% rise in second-quarter revenues thanks to strong sales of flagship hyperactivity drug Adderall XR.

Industrials
British can maker Rexam is expected to post a profits fall in tomorrow's first-half results. Peter Caldwell, of Barclays Wealth, reckons operating profits will be between £140m and £147m compared with £191m.

Leisure
The weak US dollar will damage business at drinks giant Diageo, according to Merrill Lynch. The broker maintained its buy rating on Diageo, which owns Guinness and Johnnie Walker, but cut earnings per share forecasts by 1.5% to 61p this year and 66p in 2008.

Media
The £2.4bn takeover of music group EMI by Guy Hands and Terra Firma moved a step closer after the Takeover Panel extended the offer deadline to 1pm on Wednesday. Hands has the support of 84.94% of investors but needs more than 90%.

Natural resources
Charles Stanley rates BG Group a buy on the boom in demand for liquefied natural gas, which sent earnings soaring in the second quarter. 'We believe its short-term growth prospects justify a higher share price,' said analyst Tony Shepard.

Retail
Retail analyst Nick Bubb, of Pali International, has downgraded his price target for struggling Sports Direct from 150p to 146p. Sports Direct has seen its value halve to little more than £1bn since brought to the market in February.

Support services
Oriel Securities has upgraded forecasts for back-office outsourcing group Capita, which runs the congestion charge in London. Oriel repeated expectations for profits of £239m this year but upgraded next year's forecast from £267.9m to £273m.

Technology
Microchip developer ARM Holdings, which designs systems for phones and iPods, is fully valued, according to Credit Suisse. The broker has already cut its rating from outperform to neutral and has now cut its target price from 160p to 155p.

Telecoms
Carphone Warehouse is 'more a buying opportunity than a selling one' says Collins Stewart's Mark James. Carphone was heavily sold last week and James said: 'Investors should take advantage of any weakness in the share price.'

Transport
National Express has failed to win any contracts in the current round of train franchise awards, but Goldman Sachs lifted its target price from 1000p to 1030p and raised 2008-9 earnings per share estimates by 3% in light of a cost-cutting drive.

Utilities
Shares in United Utilities have underperformed the sector by 20% over the past two years but recently it said trading was in line with expectations and the sale of its electricity distribution assets was going to plan. Analysts expect UU to maintain its dividend this year.