FTSE in-depth: Dealers wake up and smell coffee
As dealers enjoyed their breakfast tipple of double espresso or cappuccino and tasty smoked salmon bagel, speculation about an imminent bid for Coffeeheaven International intensified.
Geoff Foster: After the Bank of England kept interest rates on hold the Footsie rose.
Shares of the UK-based coffee bar operator frothed 1¼p higher to 19¾p on revived hot gossip that Costa Coffee owner Whitbread (1p easier at 1290p) will accompany Monday's trading statement with a £33m or 25p-a-share cash bid for Coffeeheaven.
Coffeeheaven operates around 90 coffee bars in Central Europe, located in Poland, the Czech Republic, Bulgaria, Slovakia and Latvia, under the brand names of Coffeeheaven and Coffee Nation.
It revealed in June it was in early stage takeover talks and also said management was to undertake a strategic review.
Coffeeheaven looks an ideal shoe-in for Whitbread, which can buy it with loose change. Costa Coffee is the UK's largest and fastest-growing coffee shop chain.
Chief executive Alan Parker has said he wants to double the size of the division from 2,000 outlets over the next five years, partly through international expansion, possibly into China and Russia. Swallowing Coffeeheaven would strengthen its European presence at a stroke.
After the Bank of England kept interest rates on hold at 0.5% as expected and maintained quantitative easing levels at £200bn, the Footsie rose 40.48 points to 5,244.37. Wall Street advanced a further 70 points at the outset as new claims for jobless benefits in November rose more than expected, but the number of people seeking extended benefits fell, and a separate report showed the US trade deficit unexpectedly narrowed.
Ahead of today's closure of its record £13.5bn rights issue at 37p, Lloyds Banking Group jumped 3.53p to 57.528p. Broker RBS ABN Amro has a target price of £1 and sees Lloyds as a powerful restructuring opportunity, underpinned by margin expansion, cost synergies and lower bad debt charges.
Satellite TV giant BSkyB jumped 20½p to 565p after Cazenove upgraded to outperform from in-line to reflect its strong growth prospects, together with the potential for margin improvement. A change in government next year might also be considered to be a reduction in the regulatory risks facing the group. Sky's second-quarter results are due on January 28th.
BT buzzed 2½p higher to 142.7p after Morgan Stanley reiterated its overweight rating and lifted its target price to 190p from 175p. British Airways firmed 2.2p to 202½p as UBS reiterated its buy stance and target price of 250p. The broker says the cabin crew strike ballot is expected to be passed next Thursday. A positive result would allow the cabin crew to strike from December 21st although it is uncertain they would strike given management's resolve to stand firm.
Cazenove is also keen on TeleCity, 15p better at 350p. It says fears of a further share placing by major shareholders 3i and Oak Hill should ease as we approach the New Year.
Waste management group Shanks firmed 2½p to 130.3p on counter bid hopes. Broker Charles Stanley believes it is likely the group will attract interest from other market participants following an approach from Carlyle Group. A revised offer of 150p a share does look to be on the cards.
Shares of vehicle tracking group Cybit almost doubled to 71½p in response to a 75p a share cash bid from Cyberspace Bidco, an acquisition vehicle controlled by funds affiliated with Fransesco Partners, a global technology-focused private equity firm. XP Power, a power control company, soared 24p to 442½p in celebration of its entrance into the FTSE All Share and Small Cap indices, moving up from the Fledgling Index.
After unveiling its highways division's biggest ever deal, OMG jumped 3p to 21½p. OMG makes a wide range of high-power cameras. The four-year, £5m deal commences in January and will see it survey every kilometre of road across the 22 counties of Wales, helping the Welsh government get a better idea of the network's condition and plan its road maintenance programmes.
Clipper Windpower, the Aim-listed US wind turbine maker and windfarm developer, rose 29p to 175p. United Technologies, one of the world's leading engineering companies, is to initially invest £126.5m into the company, acquiring a 39.3% stake at 150p a share. United Technologies also confirmed its intention to launch a partial cash offer of 180p a share - but only at a later date.
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