A bit of genuine takeover news and a spate of analysts' recommendations dominated trading yesterday.
Johnson Matthey, the platinum and catalytic converter specialist, jumped 91p to a new high of £15.83 after analysts at UBS moved its recommendation from neutral to buy and raised their target from £14.90 to £18.00. "Following a 15% underperformance against the sector over the past 12 months, we are upgrading to buy," said UBS. "It is now our preferred chemicals stock in the UK."
The company has indicated that it may spend £150m on share buybacks this year, and UBS calculates it could afford that for the next four years, making a total return to shareholders of £600m.
Hedge fund group Man, up 24p to 570.75p, was also lifted by an upgrade, as Credit Suisse increased its price target from 570p to 630p. Dealers are hoping for news soon about a possible spin-off of Man's brokerage business, which many expect to happen this summer.
Telecoms groups were in demand. Cable & Wireless climbed 2.75p to 174.25p after Credit Suisse - again - made upbeat noises: "Management seems keen on underpromising and overdelivering, in our view. We are raising our price target to 200p from 124p and maintain our outperform rating."
BT was 6.75p better at 315.75p on talk it was about to win a £570m contract to manage Credit Suisse's global telecoms business on a seven-year contract. Traders said the deal could be announced before BT's quarterly results on Thursday. At the same time Dresdner Kleinwort has upgraded from hold to buy.
On the takeover front, estate agency Countrywide - whose shareholders recently turned down a management buyout backed by 3i - added 27p to 562p on news of a fresh approach. Reports suggested US buyout specialist Apollo Management was the potential bidder. Rightmove, the website where Countrywide has about 22%, rose 27p to 495p.
Housebuilder Barratt Developments rose 51p to £12.79 on news it was paying £2.2bn for smaller rival Wilson Bowden, down 38p to £22.75.
Still with builders, Galliford Try added 2p to 159p as it announced it was in discussions with rival Linden about an offer. Linden is 65%-owned by management, with HBOS holding the rest.
On the speculative tack, there were some burned fingers at Regal Petroleum. Its shares rose to 180p initially, after weekend reports it could receive takeover approaches since it was about to announce a $1bn (£510m) oil find in Ukraine. The company later issued a statement saying it had received no new bid approaches, and there were no discoveries which had not previously been notified to the market. Not surprisingly, the shares went into reverse, down 3p to 159.25p by the close. There was also interest in exploration group Gulf Keystone Petroleum, up 3.25p to 70.25p on talk of a 105p-a-share bid.
Back among the blue chips, BP rose 6.5p to 541.5p ahead of today's results, as Goldman Sachs upgraded from neutral to buy. "BP's fall from grace has been rapid, its de-rating severe," said Goldman. "In our view BP can put the majority of its recent troubles behind it."
Leading shares recovered from early falls, with the FTSE 100 index closing 7 points higher at 6317.9. There was some nervousness ahead of the Bank of England's decision this Thursday on whether to raise interest rates again. A survey of the service sector yesterday showed signs of a pickup in costs and a rise in the number of firms putting up prices, which may unsettle the Bank. Sentiment was hardly helped by news of a letter bomb at the London office of congestion charge and TV licence group Capita, down 3.5p to 643.5p.
A host of retailers which climbed sharply on Friday on news of the potential private equity bid for J Sainsbury, fell back today. Marks & Spencer was 11p lower at 706.5p, B&Q owner Kingfisher fell 2.25p to 250.25p but Sainsbury itself added 2.5p to 509.5p on hopes an auction would develop.
Speciality chemicals group Croda added 39.5p to 620p as Morgan Stanley lifted its price target from 560p to 725p.
Support services group Mears added 5.5p to 348p as Numis upgraded from hold to add. Bob Holt has recently returned to the chief executive's chair at Mears, and yesterday resigned as a non-executive at services group Supporta, down 1p to 63.5p, to concentrate on Mears. An earnings enhancing acquisition by Mears is expected shortly.
A bid came for fashion retailer Alexon, but it slipped 2p to 209.5p after saying the offer was not much above 211.5p and had a number of pre-conditions. Seymour Pierce said the predator could be Dawney Day which has bought Austin Reed, while others suggested Baugur might be behind the approach. "Whether [a bid] materialises is a moot point," said Seymour Pierce. "But we feel that at this level an offer would be very generous." It has moved its recommendation from underperform to hold.
Spread betting firm London Capital Group said its chairman Rod Loosemore and director Geoffrey Forster had decided to step down. The two are linked to Torex Retail, which is being investigated by the Serious Fraud Office. Its shares slipped 2.5p to 170p.
Playoff
Shares in Game Group have done well recently. But yesterday the computer games retailer slipped 0.25p to 147.25p after Altium Securities moved from buy to hold. Altium said the shares may have peaked and there are fears that the new Playstation 3 may not live up to expectations. "Recent news from the US and Japan suggests that after selling out initially, PS3s are being left on retailers' shelves," said the broker. It cited a number of factors, including high price and the ongoing success of the PS2. "To throw a further spanner in the works," said Altium, "the PS3 is only to be launched in the UK and Europe as a 60GB [not 20GB] version. With the addition of a couple of games... consumers will have little change out of £500. This is bound to make early adopters think twice."