Cinven takeover talk adds Spice but satellite maker falls to earth

It emerged today that the company, which provides support services for the utilities sector and was once highly acquisitive itself, had found its way onto the shopping list of buyout group Cinven.

Last month, Cinven offered 56p a share in cash for Spice but its advances were spurned as bosses said the move undervalued the company. Investors' hopes that the bidder might return with a more generous offer pushed its shares up 3p to 52.6p.

As Cinven's offer was made the week before Spice sold its loss-making gas business and before it won a number of new utility contracts, analysts argued that a suitor would need to cough up a lot more than Cinven offered to get Spice's bosses talking.

Arden Partners analyst Geoff Allum said: "This bid will not go through at this price [56p]. It would take at least 75p in our view to get serious talks underway."

Allum added that the prospects looked good for Spice because utility companies are reliant on it to do work that they have agreed with regulators. It does everything from connecting wind farms to grids and installing water meters to mowing the grass around electricity pylons.

Shares in London reversed early losses after inflation figures came in better than expected. The FTSE 100 gained 37.71 points to 5239.84.

BSkyB was the Footsie's star performer, surging 1191/2p to 721p, after its bosses rebuffed an attempt by News Corporation to buy the rest of the satellite broadcaster. A rumour that Murdoch was looking to take full control of the company did the rounds in the City in March.

ITV was also boosted by the news, advancing 2.4p to 59p, amid vague consolidation hopes and as the move was considered to improve the rating on the entire broadcasting sector.

Inmarsat was the worst top-flight performer, losing 39p to 782p, as investors fretted over the potential cost of new satellites. In a note titled "No Jam Tomorrow?", Bank of America Merrill Lynch advised dumping the stock.

Merrill's analysts said: "Our primary concern is that Inmarsat could announce a large fleet expansion," as the firm tries to drive sales growth and fight off competition. This would be expensive, the analysts warned: "Instead of the long awaited cashflow harvest' investors had been expecting, shareholders could be hit for up to $1bn to fund new Ka-band satellites."

Inmarsat said that it was considering upgrading to the technology, but this was just one option available. Chief executive Andrew Sukawaty added that a decision on whether to upgrade the company's network of satellites is likely to be taken this year.

Poor old Luminar. Goldman Sachs today warned the club's owner is in danger of breaching the covenants on its banking facilities, which are due to be tested in August. Goldman also reduced its estimates for Luminar's 2011 earnings again in the light of falling sales. But analysts at the bank say the shares could rise sharply if Luminar successfully renegotiates its covenants or if sales pick.

"We believe that Luminar's current share price could be viewed as an option' on a successful outcome (either via renegotiation or improved trading)," analysts said. Goldman today terminated coverage on Luminar's shares, which were unchanged at 10p, "to better focus ... resources".

On the mid-tier, Bellway lost 111/2p to 6231/2p as the housebuilder warned that fears about government spending cuts were affecting house sales.

Max Petroleum dropped 11/2p to 14.9p – a fall of 9%. The Kazakhstan-focused energy explorer will plug and abandon its KZI-1 well after it failed to find any hydrocarbons in the area.

Trader talk: Hedge fund's short position on National Grid