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Could M&S be after Sainsbury's?

This article is more than 16 years old

Today's wacky takeover rumour - after yesterday's talk of a 750p bid for Barclays from Bank of America - concerned supermarket group J Sainsbury.

Qatari-backed fund Delta Two has already made a 600p a share proposal for Sainsbury, of course, and has access to its books.

But today a speculative tale went round that a private equity firm in partnership with Marks & Spencer might be planning to spoil the party.

This may seem a little left-field, but Marks did admit last February it had looked at a possible deal with Sainsbury.

It said then: "In response to recent speculation, the board of Marks & Spencer confirms that it has been considering its position in relation to a possible combination with Sainsbury. Further to this, the board has decided that it does not intend to make an offer for Sainsbury at this time".

As with the Barclays talk, though, dealers were not convinced Marks had changed its mind, with one calling the story "complete rubbish". A more plausible alternative version said that Delta Two was poised to announce an agreement with Sainsbury this weekend.

So Sainsbury added 3p to 583p while Marks was unchanged at 640p.

There was also speculative interest in services and infrastructure group Alfred McAlpine, up 10p to 510p, with Carillion said to be interested.

As for Barclays, it added 5p to 660p as it formally withdrew from the bid battle for Dutch group ABN Amro.

Overall the market ended the week on a fairly upbeat note. The FTSE 100 closed 47.9 points higher at 6595.8 while the FTSE 250 added 19.9 points to 11,390.4. The key US non-farm payroll numbers for September turned out to be quite positive. They showed a 110,000 rise, 10,000 more than forecast, and calmed fears about a major slowdown in the American economy. The US government also revised the August figures, which originally fell by 4,000 and at the time upset the markets considerably.

That number has now been changed to an 89,000 increase, since it appears that the first time round no account was taken of the number of teachers being hired at the start of the new school year.

Even a profit warning from Merrill Lynch - blamed of course on the sub-prime crisis - failed to take the shine off shares.

Back in the UK, miners rebounded after an upbeat note from ABN Amro, with Kazakhmys 70p higher at £15.96 and BHP Billiton 43p better at £17.45.

"We are now looking for a 25% increase in iron ore prices and a 20-25% increase in coal prices," said ABN. "BHP Billiton remains our preferred investment among the miners, with a portfolio positioned to take advantage of stronger bulk and energy earnings."

But if it lifted the miners, ABN did some damage to the housebuilders. It said: "We believe trading conditions for the UK housebuilders are likely to soften due to higher mortgage rates, stricter lending standards and lower confidence."

It cut its recommendation on Barratt Developments, down 33p to 765p, from buy to sell.

Property companies were undermined by British Land's decision to cancel the sale of its Meadowhall shopping centre due to the current credit crunch. British Land fell 40p to £11.24 while Liberty International was 32p lower at £11.53 and Segro lost 13.5p to 500p.

Among the banks Northern Rock's recovery faltered, with the shares down 3.2p to 158.5p. Alliance & Leicester lost 58p to 794p after a downgrade from Deutsche Bank, and HBOS dropped 11p to 948p as ABN Amro downgraded from buy to hold. Bradford & Bingley slipped 19.75p to 285p.

On Alliance, Deutsche said: "We do not believe [Alliance's] premium multiples are warranted given its extensive balance sheet leverage and the risks to earnings forecasts. We downgrade our recommendation to sell and our target price to 775p."

And on HBOS, ABN noted: "Slowing earnings momentum and the negative impact on valuation multiple caused by uncertainty over future bad debts lead us to lower our recommendation to hold and our target price from £11 to £10."

Among the few bits of corporate news, an upbeat trading statement from budget airline group easyJet saw its shares soar 24p to 571.5p.

Back at the retail sector, there was some respite for beleagured department store group Debenhams. Its shares recovered 3.75p to 102.25p after positive noises from both Kaupthing and Evolution Securities.

But car dealer Pendragon went into reverse, down 1.25p to 62.75p. There has recently been speculation the company might have to issue a profit warning due to poor September car sales, but this seemed to have blown over. Now the company has reportedly closed seven Volvo dealerships as part of a restructuring, although Pendragon is believed to have wanted to sell them.

Lower down the market, digital communications specialist DA Group was steady at 3.25p awaiting an update on its talks with its bankers and the process of selling the business.

Plus Markets - the former Ofex - saw its shares jump 2.75% to 28p before being suspended. The exchange said it was in talks about a possible reverse takeover, with Dubai Borse and Project Turquoise - the trading platform being set up by several investment banks - mentioned as possible predators.

Finally a piece of advice to companies, especially smaller ones: don't put out a poor trading statement five minutes before the market closes. Dental equipment company Astek did just that today, and immediately saw its share price marked down by 50% to 0.625p.

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