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Shares in oil and gas giants BG Group, up 30p at 1057p, and Royal Dutch Shell, 26p better at 1603p, were the subject of a burst of takeover speculation today.
The gossips were peddling the story that Shell is looking around for a buyer for its 34% stake in Australia's Woodside Petroleum, which could raise somewhere in the region of £5 billion. It wants to use the proceeds to make a downpayment on a bid for BG Group, a company carrying a price tag of almost £35 billion. The speculators say Shell wants to bid for BG Group to replenish its reserves of oil, which have been in decline during recent years.
BG has no shortage of oil reserves having struck it rich with its partner Petrobras at the Tupi field in the Santos Basin off the coast of Brazil in 2007. Oil experts say Tupi is likely to be one of the most significant finds in recent years with reserves running into billions of barrels of oil. It has already been dubbed the new Saudi Arabia.
Shell has come under heavy pressure from shareholders to replenish its oil reserves and the current rise in the crude price will have only added to that. It will certainly make any takeover of BG that much more attractive.
Takeover talk continues to buoy Dana Petroleum with the shares adding 8p to 1330p, despite the North Sea oil explorer denying it has been in talks. Yesterday the price touched 1470p with its name linked to Germany's utility giant RWE, which already has interests in the North Sea. The gossips say an offer worth 1800p a share could be in the offing.
Shares generally managed to show stock-market bears a clean pair of heels, due largely to the volatility created by the triple-witching hour. Gains accelerated as investors unwound their extensive open positions which marked the expiry of the June series of equity options and Footsie 100 futures. The FTSE 100 index responded with a rise of 63.16 to 4344.02, having started the week to 4441.95. Wall Street extended yesterday's gains in early trading this afternoon with the Dow Jones rising 40.8 to 8596.4.
Rio Tinto showed signs of steadying the ship with the price rallying 32p at 2081p having gone ex its £8 billion rights earlier this week. The nil-paid were changing hands at 684½p having started life at 920p. Dealers say the nil-paid have been undermined by the number of forced sellers yesterday among the holders of American Depository Receipts. This is reckoned to have amounted to around 42 million shares, which will be paid back to the holders next month.
The Rio share price has also been undermined by speculation that Chinalco may now sell its 11% stake because it is unhappy about the iron ore venture created by Rio and former suitor BHP Billiton, up 36p at 1414p, which it describes as a monopoly. This seems unlikely seeing that state-owned Chinalco paid around 6000p a share for its original stake in Rio and effectively blocked BHP's bid. Chinalco's move to inject £12 billion in Rio, thereby increasing its stake in the miner to 19%, was eventually rejected.
Housebuilders were marked higher after Taylor Wimpey, up 2¾p at 33¾p, appeared to call the bottom of the housing market. Berkeley Group joined in with a rise of 22½p at 777p despite the Saudi Arabian investor Saad Investors selling 6.6 million shares and reducing its holding to 11.34 million, or 8.67% of the company. Companies linked to the housing market also attracted support. Builders merchant Travis perkins put on 22p at 497p, while Wolseley, the world's biggest supplier of plumbing equipment, added 44p at 1067p. Last week Wolseley managed to regain its position as a constituent of the Footsie 100 index in the quarterly reshuffle.
Goldman Sachs has been taking a peek at the water companies. It has raised the price target on Severn Trent, up 15p at 1110p, from 1322p to 1451p with a neutral rating but is a seller of Northumbrian, 1¼p better at 247¾p, and Pennon, 5¾p dearer at 479p. It has raised its target on Pennon from 435p to 503p, but dropped Northumbrian from 262p to 237p.
BSkyB was among the best blue-chip performers, up 15¾p at 446¾p. UBS has raised its rating on the shares from neutral to buy and says worries about regulatory interference have acted as a drag on the share price which represents a good buying opportunity.
