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FTSE in-depth: Charter next on takeover menu

By Geoff Foster for MailOnline
Updated: 04:52 EDT, 7 October 2010

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To say that the industrial engineering sector has been on fire this year would be an understatement. It's gone through the roof on hopes that cash-rich international buyers would swallow those UK companies with strong technology franchises.

Geoff Foster: Magnificent miners helped push the Footsie to within a whisker of 5,700.

Gains of 60%-plus are now commonplace. Ever since Tomkins eventually succumbed to a controversial £2.9bn, or 325p-a-share, cash bid from a Canadian consortium in August, speculators have been looking for the next likeliest takeover target.

Charter International, whose share price performance has gone against the trend and been relatively flat, jumped 25p to 747.5p. Revived rumours suggested that Lincoln Electric, which is based in Cleveland, Ohio, is contemplating a £1.42bn, or 850p-a-share, cash offer. Apparently, it wants to get its hands on Charter's welding and cutting tools division, ESAB.

Investec reckons Charter is a raging buy. Its target price is 950p. It says the ESAB business is stronger than the market perceives and has the potential for margin growth as volumes recover more fully. The broker suggests the biggest risk to its target price would be a double-dip recession. And that's not going to happen.

The temperature was also turned up at perennial bid favourite Bodycote, 18.6p higher at a year's peak of 274p. The world's largest heat-treatment company responded to revived gossip that Sulzer is planning to return with a revised knock-out offer of £4 a share. Bodycote's shareholders still rue the day in April 2007 when the board rejected a 344.5p-a-share bid from the Swiss industrial conglomerate.

Magnificent miners helped push the Footsie to within a whisker of 5,700 as gold hit a record price of $1,348 an ounce and copper jumped to its highest level since July 2008. This reflected growing optimism that the demand outlook for commodities looks brighter particularly if, as expected, central banks around the world follow the Bank of Japan's lead and announce a second round of quantitative easing to maintain the global recovery. The index touched 5,695 and closed 45.63 points better at 5,681.39.

Wall Street firmed 11 points at the outset with bulls optimistic that aluminium giant Alcoa will today get the crucial US third-quarter reporting season off to a satisfactory start.

Hedge fund giant Man Group advanced 10.6p more to 237.7p as US takeover rumours refused to die down. Indian power group Essar Energy, which floated in May, surged 22.1p to 503.5p on reports of a pending bullish circular.

Higher commodity prices and continuing Chinese bid gossip lifted Anglo American 110.5p higher to 2752p.

Platinum miner Lonmin, in which Xstrata (46.5p up at 1286.5p) still sits on 24.6% of the equity, climbed 67p to 1790p. Unaffected by widespread criticism of chairman Vladimir Kim's £837m sale of an 11% stake to the Kazakh government, copper miner Kazakhmys rose 56p to 1483p.

Spurs sponsor Autonomy crashed 301p to 1551p on a shock profits warning, leaving itself even more vulnerable to a US bid. Chipmaker Arm fell 10.7p to 389.3p and Micro Focus lost 11.4p to 367.9p in sympathy.

TeleCity shed 12.1p to 486p after US peer Equinix cut its revenue target for the third-quarter and the full-year due to heavy discounting and lower revenues from its Switch and Data business.

Taking advantage of the spectacular share price rise of EnCore Oil (2p easier at 129p) so far this year following oil finds in the North Sea, directors trousered some tasty profits.

Chief executive Alan Booth, chief financial officer Eugene Whyms, exploration director Graham Dore and James Clark, commercial director, sold 294,117 shares each at 135p.

Entertainment One put on 2p to 74p after announcing that its StreetDance 3D DVD has reached number one in the UK DVD chart, with sales of more than 155,000 units.

Electrical equipment firm VPhase eased 0.25p to 2.38p following a £2m placing at 2p a share. Funds raised will bolster the balance sheet and be used to accelerate the company's commercial development within the UK and other territories.

News that strategic healthcare investor Abingworth now holds a 13% stake in the company after subscribing to a £3.6m placing at 77p a share helped IS Pharma rise 8p to 78.5p. Shareholders will also be receiving a maiden dividend.

Lombard Medical Technologies edged up 0.12p to 0.96p after signing an agreement for the distribution of its stent product, Aorfix, in Japan.

ITM Power, the energy storage and clean fuel company, surged 8% to 38p after winning grant funding of over £88,000 towards two research projects to be undertaken at Southampton and Sheffield Universities. It brings its total funding in 2010 to more than £880,000. Panmure Gordon's target price is 55p as it believes these projects should strengthen its core intellectual property and cement relationships with academia.

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