FTSE in-depth: Buyers revving up for Lookers

 

Buyers stepped on the gas and chased shares of Lookers 4.5p, or 8%, higher to 60.25p.

Geoff Foster

Potential buyers have pushed up Lookers shares by 8%

Green lights flashed for the Manchester-based car dealer, which sells everything from bog standard Fords to prestige Aston Martins and Ferraris at its 120-plus retail outlets, as dealers heard whispers from the forecourt that a cash-rich private equity player is ready to table a £346m, or 90p a share, cash bid.

Speculation was also rife that Lookers is about to announce a revaluation of its extensive property portfolio, which had a book value of £183.4m at the end of December 2009.

Yesterday, as part of its 'rumoured' financial review, Lookers announced the sale of two dealerships to Vertu Motors for £3.9m, which swelled its coffers to £140m-plus.

Lookers' successful conversion of bank debt to equity via a £80m placing last year kept the wolves from the door and the group has since gone from strength to strength.

Last month it reported record half-year figures, helped by a surge in demand for spare parts, with profits accelerating 21% to £5.2m.

Veteran property entrepreneur Jack Petchey and car dealer Tony Bramall will have a major say in any takeover deal.

They own 17.3% and 22.3% respectively of Lookers' equity and will definitely not sell on the cheap. Both are a lot happier with their investment now that the company has decided to resume dividend payments.

Insurance giant Prudential attracted late demand and closed 22p higher at 637.5p. Punters responded to news that cash-rich Fosun, China's largest private conglomerate, is looking to spend in excess of £1bn on a retail bank or life and health insurance firm.

Sentiment was also helped by a positive note from Bank of America/Merrill Lynch.

Pru's management will be speaking today at the investment bank's financial conference and the message is expected to be positive. The forthcoming IPO of Prudential's main Asian peer (AIA) is likely to be supportive to the share price too.

Clive Cowdery's Resolution jumped 8.3p to 244.3p on hopes that it could become a Chinese takeaway.

Marks & Spencer rose 5.5p to 384.4p after Morgan Stanley raised its target price 12% to 365p ahead of the retail giant's second quarter trading update on October 7.

The broker expects a 3.5% hike in like-for-like sales in both food and general merchandise.

Rival Next added 30p to 2230p, helped by news that retail sales had jumped to their highest level since May 2004.

When Wall Street rallied strongly from 80 points down to 34 up, the Footsie followed suit. Some 70 points lower at one stage, it recovered to finish 5 points to the good at 5,578.44.

Confirmation that the UK economy grew strongly in the second-quarter was welcome and overrode revived concerns that Europe's sovereign debt crisis will harm economic growth.

Early selling on the Street of Dreams followed news that confidence among US consumers fell in September to the lowest level in seven months.

International mining group Vedanta Resources shed 31p to 2262p after Deutsche Bank downgraded to hold from buy and slashed its target price to 2150p from 2325p.

ASOS, in which Denmark's Bestseller holds a 12% stake, jumped 50p to 1139p. Analyst Philip Dorgan, now at Altium Securities, advised clients to buy up to 1226p.

He says the company has created a strong online fashion brand. Replicating this internationally and surfing the expected surge in the online clothing market would lead to strong earnings growth and significant cash generation.

Perennial takeover favourite Cookson edged up 1.5p to 513p after JP Morgan Cazenove reiterated its overweight stance and £8 price target. Porvair improved 2.75p to 80.5p after the specialist filtration and environmental technology group won a contract with Lindauer Dornier.

Broadcaster ITV firmed 0.1p to 58.8p after reaching agreement with Shamrock Capital Growth Fund II, a leading US-based private equity fund, to sell its 50%stake in Screenvision for £51m in cash.

More than 84m shares in life sciences group Provexis changed hands ahead of a rumoured announcement. They touched 3.5p before closing flat at 3p.

Strontium, the consultancy specialist, jumped 3p, or 26%, to 14.5p following a positive second-half trading update. It has secured a £400,000 loan facility and has established a Swiss subsidiary to support its growing business in Europe.