Yesterday's trading: Punters move in on SThree
Takeover jackanories in trade magazines often have more than a hint of truth about them. So when The Recruiter suggested that Swiss recruitment giant Adecco has got SThree on its radar, punters got on the job.
One eye on the market: Geoff Foster
They chased shares of the London-based international specialist staffing business up to 193p before they boiled over with the rest of the market to close only 1p better at 181½p.
Adecco has a war chest of about £940m and so could comfortably swallow SThree, which is valued at £260m. A £430m or 350p a share cash offer would prove a knock-out.
Remember, Adecco was last year prepared to fork out £1.3bn or £4 a share for Michael Page before walking away much to the chagrin of many of Page's shareholders.
Steve Woolf, analyst at Singer Capital Markets, says that during the Michael Page process, Adecco stressed its strategy to 'expand' professional operations in the US, Europe and Asia as well as looking at specialised general staffing companies. SThree fits the bill and could therefore potentially be an easier transaction.
Michael Page, which slumped to a low of 165½p after management waved goodbye to Adecco's generous offer, eased 1¼p to 185¼p. Goldman Sachs downgrade to sell and slashed its target price to 171p from 222p because it believes the group will only break even in 2010.
Meanwhile, KBC Peel Hunt reckons it is time for investors to start looking beyond the downturn and getting back into the recruiters.
Its only sell is Robert Walters, 3½p dearer at 86p. It prefers Michael Page at this stage of the cycle for its scale and diversification. That's what makes a market.
After the Federal Reserve took a page out of the Treasury's book and announced plans to inject about £700bn into America's economy in an effort to combat the economic slowdown, the fabulous Footsie traded back above 3,900.
A classic bear squeeze, particularly among financials, helped the index climb 107 points before dealers took profits after seeing Wall Street open 100 points down on profit-taking. The close in London was 11.94 points up at 3,816.93.
America's bout of quantitative easing was deemed particularly positive because it should help stabilise the housing market and therefore will have a positive impact for the battered banks. Barclays soared 16½p to 112½p and Lloyds Banking Group 6.8p to South African bank Investec jumped 18½p to 238p on a Numis recommendation in the wake of satisfactory results. A rescue rights issue will not be required here as the strong balance sheet, relative lack of leverage and good liquidity position leave it well placed.
A better-than-expected 17% jump in pre tax profits at Prudential (33¾p up at 285½p) sparked a strong rally in the sector. As bears rushed to close their short positions, Legal & General advanced 6.9p, or 22%, to 38.1p and Aviva added 21.35p at 218¾p. Properties performed in a similar manner and featured Land Securities 49p higher at 157p.
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Fears that far too much money could end up in circulation and inflation could then get out of control, raised gold and other commodities appeal as hedges against rising inflation. As gold soared above $950 an ounce, Rangold Resources glittered at 3485p, up 485p. A higher copper price left Kazakhmys 46½p better at 349¾p and Xstrata 54.4p.
European Goldfields rose 11p to 167½p on satisfactory results. The company has three separate gold projects which will come into production between next year and 2011. Ambrian is a fan and has a target price of 202p.
Investors switched out of all of the old defensive favourites. Utility National Grid blew a fuse at 548½p, down 30p, while drug giant AstraZeneca closed a sickly 118p cheaper at 2255p.
Shares of specialist stockbroker Blue Oar shed 2p to 4p on the shock announcement that merger discussions with WH Ireland, 2p up at 72½p, have been terminated.
Two weeks a ago a £16.2m cash and shares deal valuing Blue Oar at around 9.66p a share looked done and dusted. The two have considered climbing into bed together for years.
Only last spring an attempt by Blue Oar to buy WH Ireland was rebuffed by Laurie Beevers, then chief executive.
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