Smiths Group heads blue-chip risers on talk of a break-up

UBS has the company on its Restructuring Watch List, and says that such a move should "create significant value for shareholders." The broking big-hitter reckons its full-year results will show that chief executive Philip Bowman's restructuring plan is delivering.

"Recent data indicate that general M&A activity has picked up," said analyst Avi Hoddes. "With Smiths homing in on the targets of the restructuring programme, we believe the break up of the group is starting to edge closer."

Hoddes recommends snapping up Smiths' shares and has a 1400p price target. Today they rose 17p to 1141p,

It was another quiet August day in the City, with equities retreating in thin trading. The FTSE 100 index slid 58 points to 5352 but the FTSE 250 index, a better barometer of UK Plc than the commodities-heavy top flight, dropped 80.9 points to 10,131.34.

Takeover speculation boosted AIM-listed First Artist in early trading, before the company was forced to reveal that it is discussions with a potential bidder. The entertainment and sport agency said the talks are an early stage and that there is no guarantee that an offer will result.

Its shares surged 41⁄2p to 181⁄2p, a gain on the day of almost a third.

Sterling Energy was one of the few other stocks attracting interest. The mutter from the gutter is that the Kurdistan-focused oil explorer will soon say that it has struck lucky.

Its shares surged 21p to 134.9p, making it London's best-performing stock.

Luminar was in the spotlight for a third day. Wild talk has the struggling nightclubs group on private equity's shopping list, but the shares were also helped by speculation that the owner of the Oceana and Lava & Ignite brands will soon have good news on funding from its lenders. Luminar ticked up 3⁄4p to 11.4p,

But it was Cairn Energy again that provided the main distraction for those traders who could keep their eyes open.

Shares in the Edinburgh-based energy explorer rose 9p to 470p amid vague speculation that a bid could be on the horizon at 700p a pop.

The possible predator is said to be a titan of crude with plenty of cash to splash. Two years ago, ENI was mooted as a potential suitor for Cairn, and one trader reckoned that the Italian company could now be taking another look.

Royal Dutch Shell — whispered to be looking at Canadian natural gas producer EnCana — was also touted as a possible buyer. But most remained sceptical about the rumour, with one warning: "This is definitely one to treat with caution."

Cairn was the eighth most-traded stock in London — after most of the usual suspects, including the banks and Vodafone. The company, which is run by former rugby union international Sir Bill Gammell, is drilling for oil off the coast of Greenland. Experts reckon that this campaign could be transformational for Cairn.

TUI Travel plunged to a 20-month low after the tour operator warned that full-year results will be at the lower end of market forecasts. The great British holidaymaker seems to have been put off by the coalition's emergency Budget and austerity measures.

TUI's shares slid 19p to 206.7p, having risen 4% yesterday, boosted by market chatter that its majority shareholder TUI AG could buy the 42.5% of the company it does not already own.

Peel Hunt analyst Nick Batram said: "Speculation about a possible bid from Tui AG is likely to be the only excitement for the foreseeable future."

TUI's gloom also weighed on arch-rival Thomas Cook, which dropped 11p to 1871⁄2p.

Mining shares suffered on the back of mixed economic data from China. The figures showed that imports are slowing, sparking concerns over demand for commodities from the metal-munching nation.

Chilean copper producer Antofagasta was off 31p at 1016p, Xstrata sank 281⁄2p to 10561⁄2p and Kazakhmys slid 29p to 1244p.

Investors opted instead for defensive stocks, with GlaxoSmithKline up 18p at 1170p and Shire 21p better at 1492p.