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FTSE in-depth: Sparks at Kesa as knight lurks

By Geoff Foster for MailOnline
Updated: 05:03 EDT, 4 December 2010

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Sparks have been flying at Kesa Electricals ever since Knight Vinke appeared on its share register with a 3pc stake in June.

Further hefty buying since by the activist investor has taken its stake up to a threatening 46.8m shares, or 8.8pc.

With rumours rife of a possible break-up bid, shares of the group which owns Comet in the UK and Darty in France have soared to a two-year peak. Yesterday, they touched 179.3p and closed 0.4p dearer at 174p.

So with Knight Vinke breathing down its neck, Kesa will surely want to light up the sector with an impressive set of interim results on Wednesday. Speculation suggests the second-quarter could emulate the impressive first-quarter performance when overall sales rose by 8.2pc with the help of TV sales during the World Cup.

It would come as no surprise if Knight Vinke bided its time until after the figures before taking its stake above 10pc. It could then call for an EGM at which it could force structural change or call for improved corporate governance.

Over the years Knight Vinke has bought strategic stakes in various large European companies, such as ENI, HSBC and Royal Dutch Shell, and has tended to conduct a high profile campaign for change. It has yet to make any public statement about its intentions in Kesa.

But Broker Liberum Capital in a note entitled 'No smoke without fire', assigns a 1 in 3 chance of some form of value-accelerating transaction shortly and has lifted its target price to 200p.

Elsewhere online grocer Ocado rose 16.6pc, or 11pc, to 169.8p over hopes pre-Christmas sales will be boosted by continuing bad weather conditions in the UK and excitement that UBS has purchased a 5.1pc stake.

The shares still stand 6pc below the flotation price but have been popular of late amid speculation about a possible bid from William Morrison (0.8p easier at 271.1p).

Trust Wall Street to stop the rally in its tracks. Up a further 16 points in early trading, the Footsie fell away to trade 47 points lower after US data showed that the US labour market is still not out of the woods. The close in London was 22.24 points down at 5,745.32.

The Street of Dreams opened 29 points lower following news that US non-farm payrolls rose by a meagre 39,000 last month, compared with consensus forecasts of an increase of 150,000. The US unemployment rate rose to a seven-month high of 9.8pc, up from 9.6pc. Financial Times publisher Pearson gained 12.5p to 995p on talk that a bullish broker tome will drop on fund managers' desks on Monday. Catalytic converter group Johnson Matthey leapt 59p to 1927p after Liberum Capital lifted its target price to £25 from £20 on the back of a Heavy Duty Diesel catalyst growth story.

Randgold shed 40p to 6035p after Oriel Securities downgraded it to reduce from hold. The broker fears the gold miner could miss full-year production forecasts because of increasing tensions within the Ivory Coast. The opposition party's victory in the long overdue general election has led to an increase in violence which could affect progress at its new Tongon mine. It recently started production and accounts for around 20pc of net asset value.

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Sellers left hedge fund giant Man Group 9.6p lower at 279.2p after Numis moved to reduce from hold. The broker's main AHL fund has returned a fall of 5.1pc since the board said it was performing well in a QE2 (quantitative easing) market.

Investec again slammed the brakes on industrial transportation group Wincanton, 2p off at 169.25p. It reiterated its bearish stance and target price of 120p, remaining concerned about high debt levels and its significant pension fund deficit of £129m. It has woefully low profit margins in mainland Europe and its planned hefty spend on IT over the next two years is risky in the current tough economic environment. Dog of the day was Promethean, the interactive education technology firm whose chairman is Sir Peter Burt.

The shares crashed 25.75p or 33pc to an alltime low of 52.5p following its warning that full-year profits will be well below market expectations as education budget constraints deepen in the US and Europe. Clients have deferred orders.

Buyers continued to chase Xcite Energy 22.25p higher to 332p ahead of crucial flow test results from the Bentley heavy oil find in the North Sea. The stock has trebled since October.

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