Market report: Thursday close
The prospect of a bidding war for Dobbies Garden Centres sent shares in the nursery chain soaring today as property magnate Sir Tom Hunter squared up to mighty Tesco.
Hunter moved to scupper the supermarkets chain's proposed £155.6m takeover of Dobbies by snapping up 10% of the company to take his holding to 20.6%, just short of the 25% needed to block the Tesco deal.
Tesco's agreed offer last week valued each Dobbies share at £15, but Hunter upped the ante by splashing out £17.50 a share in last night's sudden move. His West Coast Capital investment vehicle also said it was 'considering all its options in relation to its shareholding, one of which is a possible offer for the company'.
Shares in Dobbies jumped 260p, or 17%, to 1785p today. Said an analyst at Kaupthing: 'Hunter's enlarged stake is close to a level that would be sufficient to block the current Tesco proposal, and may lead to Tesco raising its offer further beyond £17.50.'
Hunter's interest in Dobbies is hardly surprising given that in the past 12 months he has acquired Wyevale Garden Centres and Blooms of Bressingham as he moves into the lucrative nursery sector.
Analysts believe he either wants to expand his garden-centres empire by acquiring Dobbies or to stop Tesco becoming a competitor. Last week's bid from Tesco came as a shock to the City as Dobbies would represent its first non-food acquisition. Today, Tesco said it was 'following developments'.
The wider London market was buoyed by a raft of upgrades in the City today and a strong performance on Wall Street and in Asia overnight. Global markets rallied after the Federal Reserve's Beige Book report on the economy made an interest-rate rise across the Pond look less likely and US government bonds retreated from their recent five-year high. The Dow Jones continued its rally with a rise of 60.10 to 13,542.40.
In London, the FTSE 100 index responded to the euphoria with a rise of 90.3 to 6649.9, with only eight stocks in the red.
Bradford & Bingley topped the leaderboard with gains of 23¼p to 423p after Credit Suisse raised its rating from underperform to neutral and set a target price of 435p. British Gas owner Centrica also benefited from an upgrade, this time from Citigroup, and its shares were up 16¼p to 380¾p.
Both companies have seen their stock price slip in recent weeks, but analysts believe they represent good value again.
Marks & Spencer was back in fashion after upgrades from HSBC and Panmure Gordon. HSBC said that 'the post-results punishment is over' after fourth-quarter trading failed to live up to sky-high expectations in the City.
Panmure said the 'defensive characteristics' of M&S 'could prove increasingly attractive to investors in coming months'. The shares rose 12p to 691¼p.
Demand for low-cost, transatlantic flights helped business-class airline MAXjet record a solid if not stunning debut on AIM, with shares trading at 140p, having been listed at 138p.
Speedy Hire surged 35p to 1275p after it agreed to buy Hewden Tools for £115m. The acquisition will be funded by a new £325m debt facility and the placing of 4.36m shares at 1250p a share.
SHARES ADVICE & TOOLS
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TAKING STOCK
BANKING AND FINANCE
Alliance & Leicester shares are the most expensive of the UK banks, says Collins Stewart. Nevertheless, the broker has increased its profit forecasts for the year by 3% thanks to a deal the bank has signed with the Post Office.
BUILDING AND PROPERTY
Housebuilder Barratt is the cheapest stock in the sector, says Chris Millington, analyst at Bridgewell Securities. Bridgewell argues the shares have been oversold since the merger with Wilson Bowden was announced earlier this year.
CONSUMER
Is Irish food group Greencore about to receive a bid? The shares rose sharply yesterday on news property developer Liam Carroll had raised his stake to just short of the one-third that would trigger an automatic takeover offer.
ECONOMICS
Average pay awards edged up a little to 3.5% in the first three months of the year, though wage inflation is still lagging rises in the Retail Prices Index. Incomes Data Services, which compiled the survey, says the 3.5% level is the highest since September 2001.
ENGINEERING
FKI's recent strategic review was something of a damp squib, says Bridgewell Securities, though it was impressed with the detail management gave on its plans. Bridgewell says the increased confidence might mean better returns to shareholders.
HEALTH
GlaxoSmithKline will donate 50 million doses of H5N1 bird flu vaccine to the World Health Organisation to boost its stockpiles. The doses will be delivered over three years, and are earmarked for the world's poorest countries.
INDUSTRIALS
Smiths Group will seek to unlock value by orchestrating a full breakup of the company, says Citigroup. It has already sold its aerospace arm for £2.5bn in cash and plans to return most of the proceeds to shareholders.
MEDIA
Virgin Mobile founders Joe Steel and Alan Gow are leaving the company following its integration with cable operator Virgin Media. Deputy managing director Steel leaves in July, and managing director Gow goes when a successor is found.
TECHNOLOGY
United Business Media is taking the axe to technology publishing arm CMP with the loss of 200 out of the division's 1150 jobs, almost all of which are in the US. It will close and merge many titles as it shifts from print to online publishing.
NATURAL RESOURCES
Mining giant Rio Tinto will take a £23m charge against first-half earnings after settling a dispute with the Australian Tax Office. The settlement was 'made without any concessions or admissions of liability', the company said.
RETAILING
Broker Charles Stanley rates Halfords as well-placed to deal with rising interest rates and a retail slowdown. Analyst Sam Hart says its emphasis on car-maintenance products means customers will continue to shop at its stores.
SUPPORT SERVICES
DSG International is upping the battle between its TechGuys and Carphone Warehouse's Geeks in the battle for the £2bn market for repairing home computers. TechGuys has lured Tom Barry from rival Comet to become its managing director.
TELECOMS
Vodacom, the South African mobile phone outfit part-owned by Vodafone, has increased subscriber numbers by 20% to 23 million. Itmade a profit of £750m in its financial year, up 23% and has nearly 60% of the domestic mobile phone market.
TRANSPORT
Renault'sworldwide sales fell 4.2% in May, after a similar drop in April. The French car firm is trying to win back European customers with a new version of the small Twingo and is launching its Logan brand in Argentina.
UTILITIES
Energy suppliers don't go out of their way to ensure customers latch on to cheap new deals. Paul Green of EnergyHelpline.com says: 'People need to ensure they do not miss out on these offers, and use the internet to save themselves hundreds of pounds a year.'
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