Yesterday's Trading: Centrica closes in on Venture

By Geoff Foster for MailOnline
Updated: 04:13 EDT, 7 July 2009

Industry sources believe the chances of Venture Production, 3.5p up at 812p, retaining its independence look slim.

Moving in: British Gas owner, Centrica, is closing in on Venture

They believe that 23.6% shareholder Centrica will launch a £1.35bn or £9-a-share cash bid for the Aberdeen-based oil and gas producer before next Monday's 5pm deadline.

The takeover panel gave Centrica a July 13 'put up or shut up' deadline to make a firm offer. If it does not make an offer, it will forfeit its right to do so for six months.

Venture Production has been on Centrica's shopping list for years. It turned the corporate screw in March when it bought a 22% stake at 725p a share, forking out £239m in the process. Days later it increased its shareholding to 23.6% and dealers said then it would be just a matter of time before a takeover bid, hostile or otherwise, would be made.

Legal & General is one of Venture Production's biggest shareholders and apparently wants at least £9 a share for its stake. Centrica is well funded. It raised £2.2bn in a rights issue last December and has a war chest of £1bn to acquire further gas assets.

Venture operates mainly in the North Sea and specialises in saving stranded reserves - those considered uneconomic or too difficult to retrieve. Venture's recent trading update was upbeat with the company making a strong start to the year with first-half production up 16% year on year to 52,900 barrels of oil equivalent per day.

Worries about the slow pace of the global economic recovery following last Thursday's dire US employment numbers got the week off to a dull start.

As Wall Street suffered a delayed Independence Day holiday hangover and traded 40 points lower at the outset, the Footsie drifted in thin trading to finish 41.37 points off at 4,194.9 - its lowest level in more than two months.

Volatile miners led the retreat in sympathy with lower commodity prices. Lonmin was notable for a fall of 99p at 1060p. Rio Tinto shed 141p to 1885p and BHP Billiton 57.5p to 1287.5p after UBS downgraded their price targets by 10%.

Household goods giant Reckitt Benckiser resisted the malaise, rising 70p to 2852p on rumours that a bullish circular from a leading securities firm will land on fund managers' desks this morning ahead of the group's interims due later this month.

F&C Asset Management rose 2.5p to 68.5p following a placing of 11.7% of the group's equity at 62p with various institutional investors.

It's a big week for housebuilders with several leaders producing trading updates, starting with Persimmon's statement today. Broker Royal Bank of Scotland, aka ABN Amro, has a neutral stance on the sector. It still expects UK house prices to fall further, but the risk of significant over-correction looks lower and it has reduced its peak-totrough decline from 35% to 30%.

It rates Bovis, 13.25p up at 389.75p, and Bellway, 16p dearer at 627p, as appealing plays and upgraded both stocks to buy from sell.

Social housing and domiciliary care group Mears dipped 2.5p to 223.5p after announcing £70m of new contracts across both of its core divisions, potentially rising to £90m if options to extend are exercised. In the year to date new business has increased to £175m and the order now is well in excess of £1bn.

Investec has a target price of 332p and says the bid pipeline remains strong and further positive news flow on contract wins is likely. Recent industry gossip has suggested the company has won a major Brighton & Hove social housing contract and confirmation could come before the end of the month.

San Leon Energy, the oil and gas company with assets in Morocco, Italy, Poland, the Netherlands and the US, gushed 3.5p to 23p after announcing a commercial gas discovery at the Palo Pinto Gas field in Texas.

Ascent Resources added a fraction to 4.38p after agreeing terms with Hungary's leading oil and gas company MOL RT to conduct joint operations in south-western Hungary.

News of contract gains with its far-eastern joint venture partners lifted Medilink-Global UK, which provides electronic health card network services, 2.25p to 12.75p. Broker SVS Securities raised its current year pre-tax profit forecast to £120,000 from £75,000.