Healthcare group Smith & Nephew and big mining groups stood out on a quiet day, albeit heading in different directions. S&N shares jumped 17.5p to 537.25p - up just over 3% - on renewed talk that it could be a bid target.
The company, it may be remembered, lost out on the auction for US rival Biomet, which was bought this week for $10.9bn (£5.5bn) by a private equity consortium including Goldman Sachs, Blackstone and Kohlberg Kravis Roberts.
Now the suggestion is that the consortium has its eye on S&N and plans to merge it with Biomet - thus creating a stronger rival for the US market leaders for joint implants, Johnson & Johnson, Stryker Corporation and Zimmer.
S&N's failure to win Biomet came after it lost the fight for Swiss orthopaedics firm Centerpulse in 2003, with Zimmer emerging the winner in that case. "Smith & Nephew has now failed several times to augment its business through acquisition," said Jeremy Batstone at Charles Stanley Research. "As a result there has been some very real criticism levelled at the chairman, who has only delivered pedestrian returns to shareholders over the last 10 years."
He believes S&N is vulnerable to a bid and sees sense in merging the business with Biomet and developing it away from the public arena. "If they want to take on the big boys like Zimmer and Stryker, they will have to increase the scale of the business."
He could also see an auction developing, with the three US groups likely to show an interest in S&N. Any buyer would probably sell S&N's underperforming Wound Care business to recoup a little of the purchase price. Given the amount paid for Biomet, he said, a take out price for S&N could be anything between 620p and 800p. At the moment Charles Stanley is keeping its buy recommendation with a 650p target.
Elsewhere the miners were weaker on easing commodities prices, especially copper. Kazakhmys lost 42p to £10.89 , Rio Tinto was down 70p to £26.65 and Antofagasta was 11.5p lower at 496.5p.
Other fallers included AstraZeneca, which slipped 7p to £27.28p after Dresdner Kleinwort cut its price target from £27.00 to £25.50 after this week's adverse patent ruling in Europe on its best selling Nexium product. Concerns about a $13.5bn bid for India's Hutchison Essar mobile phone business left Vodafone 2.25p lower at 143.75p.
All this helped push the FTSE 100 down 14.9 to 6183.7 by the close.
Among the mid-caps, Burren Energy was a major casualty, down 45p to 840p. Dealers said there was uncertainty about the company's operations in Turkmenistan - which account for 40% of its business - after the death of the country's president. The company is in the middle of negotiations with the energy ministry about gas sales, and analysts said there was a chance these could stall while the country looked for a successor to Saparmurat Niyazov.
Bridgewell analyst Nathan Piper was still positive, saying: "From Burren's point of view the likely outcome is a Soviet-style appointment of president and the resumption of business as usual within the first quarter of 2007."
Engineering group Amec fell 11.5p to 418.5p after a potential bidder said it would not be making an offer "at this time". A consortium including Texas Pacific and First Reserve Corporation said it had approached the Amec board about a recommended transaction, but the board had refused to provide due diligence access. The consortium said it could still make an offer in the next six months if the board agreed, a rival offer emerged or if there was a material change in circumstances. Traders did not rule out any of those. One said: "This statement looks like a dig to say, we weren't shown the books. It is not all over by any means."
ICI - another recent target of takeover speculation - added 7p to 448.25p, while cruise group Carnival sailed ahead 71p to £25.36 after reporting a 24% increase in fourth quarter profit.
Technology group Wolfson Microelectronics added 7.75p to 278p on news it had replaced finance director George Elliott - who is leaving for personal reasons, the company said - with Mark Cubitt from US group Jacobs Engineering. He will join early next year. The move follows last month's announcement of the departure of chief executive David Milne. Analysts at Bridgewell said: "The change in both finance director and chief executive during the first two months of 2007 could hamper short-term share performance as investors wait to hear from the new management."
AgCert, which specialises in creating carbon credits which can be bought by polluting industries to pay for their emissions, issued an upbeat trading statement, lifting its shares 10.5p to 157.5p.
Serviced Office Group was steady at 10.25p after it bought a freehold property in Teddington for £3.35m. Analysts believe more deals are in the pipeline, including a big one early in the new year.
Electric vehicle developer Traction Technology made its debut on Aim, rising to 32.5p from its placing price of 28p.
Finally EG Solutions, an IT and software group, slumped 67p to 75.5p after it warned profits would fall well below current market forecasts.
Black mood
Analysts are concerned about Christmas trading at Blacks Leisure, the outdoor goods retailer. Investec has cut its recommendation from hold to sell, saying the mild weather will have had an effect "and its high operational gearing means the impact on profits is significant." Blacks shares, down 4.75p to 399p yesterday, have recently been lifted by bid speculation. One suggestion was that Sportsworld, run by the reclusive (until last week) Mike Ashley, might reverse into Blacks. But Richard Ratner of Seymour Pierce said: "If, and it is a big if, Sportsworld does float, it will take some considerable time. On that basis the risk/reward at Blacks looks to be on the downside." He has cut his full year forecasts from £13m to £11.5m and moved from hold to underperform.