Market report: Thursday close

By This Is Money
Updated:

 

The temperature was rising today for shareholders of Enodis as the shares surged 78½p to 230p after it emerged after the close of business last night that the kitchen equipment maker had received a takeover approach.

London Stock Exchange trader, tues 22nd January 2008

Enodis, which provides ovens for the likes of the McDonald's fast food chain and Starbucks coffee outlets, says it has received an indicative offer worth 260p a share from America's biggest supplier of ice machines, Manitowoc, which would value the business at £955m. Back in August 2006, Manitowoc abandoned an £894m offer for Enodis, but this time it already has the backing of Enodis's 20.7% shareholder Legal & General.

Enodis was the target of two other unsuccessful bids two years ago. One came from another US company, Middleby Corporation, and the other was from Aga Food Services, which was prepared to offer almost £800m.

Manitowoc unsuccessfully bid last year to buy the kitchen equipment arm of rival Aga. It wants to enlarge its kitchen services side which currently accounts for 11% of group sales.

Enodis upset speculators last month when it warned of a softening in trading conditions in the US, its biggest market. This led to a spate of profit downgrades.

Mitchells & Butlers (M&B) rose 16¼p to 334¾p amid mounting speculation that private-equity outfits CVC and Blackstone have joined forces to buy a near-30% stake in the 2000-strong pubs chain.

Other interested parties are said to include Permira. M&B cheered the market yesterday by saying it had increased revenues despite a drop in beer sales. But Punch Taverns, up 19p at 581p, called time on a proposed merger with M&B last month after the latter was forced to make write-offs totalling £274m.

Shares generally drifted off ahead of the decision by the Bank of England's monetary policy committee vote to cut interest rates by a further quarter point to 5%. The move was widely expected but failed to inject any fresh enthusiasm into investors. The FTSE 100 index fell 18.8 to 5965.1.

Banks struggling to maintain their profit margins in the face of interest rate cuts bore the brunt of the markdown. Royal Bank of Scotland fell 7p to 362¼p, Alliance & Leicester 30½p to 495½p, and Barclays 7¼p to 463¼p.

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Most brokers remain bullish about the outlook for the mining sector because of continued demand for raw materials. ABN Amro has downgraded Xstrata, 32p lower at 3940p, from buy to hold and cut its target from 4100p to 3600p as part of its latest review. It has kept Antofagasta, 18p cheaper at 768p, at hold but lifted its target from 670p to 720p. Anglo American, down 10p at 3360p, is still a buy with its target raised from 3550p to 3900p, along with Vedanta Resources, down 52p at 2280p, whose target is lifted from 2300p to 2630p.

Scottish and Southern Energy rose 3p to 1360p despite JPMorgan downgrading the shares from overweight to neutral, but raised its target from 1310p to 1700p on valuation grounds. The company's fundamentals remain attractive, but JPM does not see the group as a takeover target.

Goldman Sachs continues to rate Inmarsat, up ¾p at 436¾p, at neutral, but has raised the price target from 475p to 496p to include the effective purchase of CIP UK Holdings. Goldman has included CIP UK in its valuation, but not in its forecasts at this stage.

AIM-listed Econergy International rose 5½p to 29p after receiving a number of bid approaches. The renewable power producer was reacting to a statement from 18.3% shareholder Consensus Business Group which said it was reviewing its options for Econergy.

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TOMORROW'S AGENDA

• Confectionery giant Cadbury Schweppes delivers a first-quarter trading update as its shareholders meet to approve the terms of the demerger of its US fizzy drinks business, Dr Pepper Snapple. It is hoped the break-up, likely to be completed in May, will increase profitability by allowing the firm to focus on its faster-growing sweets and chocolate side, but analysts are concerned at the cost of the move. Citigroup forecasts like-for-like sales growth will be ahead of target at 8%, aided by price rises and Easter falling earlier this year.

• Market research group Taylor Nelson Sofres updates the City on trading. Analysts say it should outperform rivals in the event of a downturn in the sector, given its fairly low exposure to the weak US market and high number of long-term contracts. Rumours suggest private equity is plotting an offer for TNS, which was the subject of bid speculation two years ago after a profit warning.

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