FTSE in-depth: Predator could home in for bid

By Geoff Foster for MailOnline
Updated:

 

It's all about timing. You would have thought a cash-rich predator would have bid for Home Retail by now after the shares ended the year a depressing 40% down at 193p after being booted unceremoniously out of the prestigious Footsie in September.

Geoff Foster

Foster: As the price of Brent crude hit $100 a barrel for the first time since October 2008, the Footsie drifted.

Shares of the Argos catalogue-to-Homebase DIY group have since rallied following a better-than-expected Christmas trading period and yesterday closed 5.2p better at 216p.

Initially sold down to 208p on a sell recommendation from Execution Noble, now part of Espirito Santo, punters switched on to revived talk of a £2.37bn, or 290p a share, cash bid from American retailing giant Wal-Mart, which owns supermarket group Asda.

Growing Asda's non-food and general merchandising business is something that Wal-Mart has often talked about in the past because it would love to close the gap on Tesco. A move for Home Retail would make a great deal of sense.

WalMart is currently bidding for South African retailer, Massmart, but analysts agree that it has plenty of firepower to bid for both. Recent reports that Home Retail was considering launching a bid for Blacks Leisure (2.5p easier at 33p) has been seen as a defensive move against a possible bid for itself.

Execution Noble advised clients to exit because it feels the new 75th edition of the Argos catalogue is biased towards the lower-income consumers, who it believes will face more pressure on discretionary budgets than others.

A revival of the old Qatar Investment Authority takeover tale helped J Sainsbury advance 10.4p to 381.3p. The Arabs retained a 26% stake after walking away from a £6 a share offer in November 2007, blaming the credit crunch.

Tesco put on 4.6p at 403.75p after Nomura Code added the stock to its European Recommended portfolio list. European food retailers now trade on a substantial discount to both non-food retailers and food producers. It believes the discount is unjustified.

Rising tensions in Egypt and the potential disruption to oil supplies had investors fretting about the impact of higher oil prices on the global economy. As the price of Brent crude hit $100 a barrel for the first time since October 2008, the Footsie drifted 18.4 points lower to 5,862.9, while the FTSE 250 shed 74.5 points to 11,471.5.

Wall Street opened 25 points better with sentiment across the Pond helped by news of Massey Energy's £4.3bn bid for rival coal producer Alpha Natural Resources.

Rexam rose 7p to 341.6p after successfully completing Beverage Can contract negotiations and saying that its Beverage Can South American business continued to grow strongly, and that it would continue to invest in order to meet the strong demand for beverage cans in this region.

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Up from 270p in November, profit-taking in the wake of in-line annual profits dragged shares of recruitment firm SThree down to 361p before they closed 23.7p lower at 370.7p. Investec raised its target price to 470p from 410p to reflect the recovery prospects of a very strongly-managed business.

Punters climbed aboard AssetCo, the company which runs London's fire engines, on hearing that it has received a bid approach. The close was 9.5p or 18% higher at 62p. Irishman John Shannon is chief executive and sits on 29.7% of the equity and will not sell the company on the cheap.

Details of the mega US coal deal saw Atlantic Coal, the open cast anthracite production and processing company with activities in Pennsylvania, chased up to 1.285p before profit-taking left the close 0.02p cheaper at 1.205p.

Despite an Evolution Securities recommendation and target price of 205p, Coal of Africa eased 1p to 105.75p. The broker says the company has made progress on a wide number of fronts and expects more advances in the coming months which should give the share price a boost.

Strong interims lifted Allocate Software 3.5p to 82.5p. The provider of workforce and compliance optimisation software, reported a 77% increase in revenues to £15.9m and a 227% leap in trading profit to £3.6m. Numis raised its target price to 96p.

IGas Energy, the domestic gas producer and developer of unconventional gas resources, surged 6p to 70.5p after acquiring Nexen Exploration UK. The deal gives IGas access to Nexen's unconventional gas technology, including the secondment of key personnel. In exchange Nexen receives a 29.9pc stake in the enlarged group.

A disappointing quarterly trading update on its Australian gold production activities left Norseman Gold 3.75p lower at 50.5p.

Solomon Gold firmed 0.25p to 29.25p after announcing good progress in drilling its first hole on its 100pc owned Fauro Island Project in Solomon Islands.

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