FTSE in-depth: BG gushes after bid speculation

By Geoff Foster for MailOnline
Updated: 04:29 EDT, 19 May 2011

Revived bid and stakebuilding speculation, and an upgrade by leading City broker UBS, were all the ingredients required to spark a useful rally in oil and gas explorer BG Group.

Foster:

Down around 9% over the past month after Chancellor George Osborne raised the supplementary charge levied on oil and gas production in the North Sea to 32% from 20%, the shares bounced back strongly to close 41p up at 1372.5p.

Excited punters responded to a regurgitation of the age-old tale that Royal Dutch Shell (50p up at 2162p) is lining up a knock-out cash bid for the company.

The powers that be suggest that RD Shell should soon bank £5bn-plus from the long awaited sale of its remaining 24% stake in Woodside Petroleum to BHP Billiton (35.5p better at 2379.25p) and will use the proceeds to help finance a bid for BG Group.

There was gossip too that China's state owned CNOOC, a partner of BG's in Brazil, is looking to buy a strategic stake. Earlier this year JP Morgan Cazenove forecast that state oil companies such as CNOOC would go on a shopping spree in 2011.

Yesterday, UBS upgraded BG to buy from neutral with a target price of 1550p. The broker regards BG as a high quality long-term growth story and expects the process of sanction and development of the Santos exploration field in Brazil and the Curtis field in Australia to de-risk the production outlook and drive the shares higher.

Ahead of today's pricing of controversial commodities trader Glencore's recordbreaking IPO, buyers returned for selected blue chips helping the Footsie recover 62.49 points to 5,923.49.

Early gossip suggested Glencore will be priced at 530p - the exact midpoint of the initial 480p to 580p range - but late rumours suggested a level of 545p. Glencore will also be listed in Hong Kong and its market value of £36bn-plus will propel it straight into the Footsie.

Miners made progress on hopes of a sparkling Glencore debut with Eurasian Natural Resources 34.5p up at 840.75p and Randgold Resources 177p higher at 4797.5p.

Wall Street rallied 80.60 points to 12,560.20 thanks to a rebound in commodity prices and strong earnings from Yell. Minutes from last month's Federal Open Market Committee meeting showed it discussed tightening monetary policy - but that the talks did not mean it would raise interest rates soon.

Properties were in the vanguard of the market's advance following impressive results from Land Securities, 48p higher at 795.5p.

The firm reported an 18% gain in full-year net asset value to 885p per share, including a £908.8m increase in the value of its portfolio to £10.6bn, up 9.7pc from the previous year. British Land climbed 26.5p to 604.75p and Hammerson 15p to 479.3p.

Shares of drugs firm Shire were hyperactive and closed 49p better at 1948.5p. Analysts gave the thumbs-up to its £460m acquisition of Advanced Biohealing Inc, a small private company with a focus on tissue regeneration using cell based therapies.

Its currently marketed product is Dermagraft, which is used as an artificial skin replacement indicated for the treatment of diabetic foot ulcers. Shore Capital says buy.

A Goldman Sachs sell recommendation held back BAE Systems, 0.3p off at 336.75p. At an investor presentation in Washington on Tuesday, the defence giant acknowledged the pressure on the US defence budget, greater pressure on pricing, and increased competition.

Goldman believes BAe cannot implement a share buyback until it has made significant progress on pension discussions with the trustees/unions and so a buyback announcement is unlikely until much later in the year.

Ricardo rose 4.5p to 352p after the engineering and automotive consultancy company said order intake for the first four months of the year rose about 18pc, boosted by orders from the passenger car sector. The January to April order book was £104m, compared with £87m a year ago.

Speedy Hire, the UK tools rental firm, was sold down to 30.25p following an Altium Securities sell recommendation but rallied to finish only 0.25p easier at 32.5p. Finance director Justin Read is leaving to join SEGRO and the company warned that the next 18 months for the business will be 'bumpy'.

Canadian financial services group Canaccord Financial closed flat at 850p despite better-than-expected fourth-quarter figures. Chief executive Paul Reynolds said the revenue and net income generated were second only to the record results achieved last quarter.

Charles Stanley Securities has kept its target price at 1080p.

Eruma, the provider of anti-terrorism blinds and intelligent emergency lighting, shot up 1.13p or 24% to 5.75p on contract news. It has won a £400,000 contract with a major UK financial institution to install its security blinds at several landmark buildings across London.