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Could a bidder be circling for BG Group?
The spotlight once again fell on the perennial takeover target today but this time it was BHP Billiton — the world's biggest listed miner — whom traders said may be giving the gases and oil group admiring glances.
“There have been rumours about one of the miners buying into oil for a while — and today's rumour of BHP looking at BG makes some sense,” said one.
“BHP has cash, cash, cash and there is no one that looks likely to spark their interest in the mining sector at the moment. Plus it has its own petroleum business already — it could be a decent fit.”
Some in the City were sceptical about the chances of a bid, however, noting that dealers have constantly talked up BG in the past as a candidate for a takeover. Titans of oil Exxon Mobil, Petrobras and Royal Dutch Shell have all previously been named as potential suitors.
But another trader, who was keen on the idea, said: “Well, we always used to talk about Kraft taking over Cadbury — and we were right there.”
BG's shares rose 11p to 1105½p and BHP advanced 19p to 1876p, ahead of its interim results tomorrow.
Shares in London rose for a second day as miners, banks and the property developers claimed most of the top spots on the winners' board. The FTSE 100 added 10.6 points to 5102.93 despite the Dow falling back below the psychologically significant 10,000 level last night in New York.
But while bid rumours surrounded BG, hopes of an offer for ITV were fading. Some investors had hoped that when BSkyB sold part of its stake in the Coronation Street broadcaster, this would attract some interest from parties planning a takeover. In the past, Big Brother creator Endemol and RTL — the European media giant which owns Channel Five — have been mooted as potential bidders for ITV, with some of the wilder talk even naming Disney.
But it is believed that institutional investors such as pension funds, rather than a trade buyer, bought the shares sold by Sky yesterday.
The move was dictated by demands of the regulators and saw the satellite broadcaster trim its holding in ITV from 17.9% to below 7.5% for £196 million. This was a loss of around £350 million on what Sky had initially paid for the stake, but since it had already written down the value of the stake when ITV's shares were changing hands at around 20p a pop last year, Sky was actually left with a windfall of over £100 million. ITV's shares slipped 1p to 50¼p today, and BSkyB gained 2½p to 526½p.
Miner Xstrata was the best-performing blue-chip as analysts digested yesterday's results. Shares in the metals group added 31¾p to 1015¾p thanks to a string of broker upgrades. Morgan Stanley was Xstrata's biggest fan saying that the bull case — where the shares rise to 1944p — looks “too compelling to ignore” and that the company's debt level is no longer a concern.
Among the banks, Lloyds Banking Group was the strongest, up 1.2p at 48.5p after slumping to a seven-month low yesterday. Execution Noble's analysts rate it a buy, arguing that demand for bank credit will increase as investors shun sovereign risk and that Lloyds will be the biggest beneficiary of this trend. They also reckon Lloyds could be back in the black this year.
Elsewhere, Resolution, the Clive Cowdery buyout vehicle, was the biggest blue-chip faller ahead of its results on Thursday. The shares slipped 2p to 75p.
British Land was on the up, after posting a surprise 18% jump in net asset value in the third quarter, which sparked investors hopes that the commercial property market is now off its sick bed. KBC Peel Hunt slapped a buy rating on its shares which climbed 13¾p to 451¾p. Rival Land Securities was up 17p at 639p.
The financial system may almost have brought the economy to its knees, but many of those at its centre are still thriving. Shares in Patsystems, which provides trading systems for derivatives traders, ticked up 1.3p — or almost 6% — to 24.2p after posting a stellar set of figures for last year. The AIM-listed group posted a 7% jump in pre-tax profits and ramped up its dividend by 17% and said it enjoyed its “most successful year despite the collapse of Lehman Brothers.”
Trader talk
A raft of fund managers at Gartmore Investment and Gartmore Fund Managers have sold down their stakes in electronic components distributor Acal. Gartmore, which recently listed on the London Stock Exchange, sold 269,093 shares across five of its investment vehicles, reducing its total holding to 12.8%. At a current price of 133.25p, the disposal would amount to £358,566 while the five investment vehicles collectively own £4.8 million. Andrew Russell, Gervais Williams and Harmesh Suniara, co-managers of the Gartmore Fledgling investment trust, now hold 4.3% of Acal's share capital, while Williams' Gartmore UK & Irish Smaller Companies fund, which he co-manages with Rob Giles, has a 2.7% stake. Williams also manages the Gartmore Growth Opportunities trust, which owns just under 1% of Acal. The Strathclyde Pension fund managed by Gartmore Investment, has a 3% stake in the company, while Gartmore's Alphagen Volantis hedge fund owns 1.9%.
Tomorrow's agenda
All eyes will be on Threadneedle Street once more when the Bank of England issues its latest inflation report. Prices rose at a record rate in December, pushed up 2.9% by higher petrol prices. Inflation is likely to have breached the 3% level in January — which means Governor Mervyn King will have to take out his pen to write the Chancellor an explanation again.
Dettol-maker Reckitt Benckiser reports full-year results and will show just how well it has done out of the swine flu epidemic. It is expected to post a rise in annual profits of more than 20%, with analysts putting full-year sales at around £7.7 billion.
Mining giant BHP Billiton posts interim results. ING analysts note: “Though we don't believe Billiton is likely to make a bid for a large acquisition … we do not rule out further junior miner acquisitions.” They predict BHP will still be suffering the effects of the downturn, with like-for-like sales down 22% to $23 billion (£14.7 billion).
Portfolio
BUY: SPORTS DIRECT
Numis Securities says cheap tracksuits are still in vogue and tips investors to buy shares in Sports Direct. Analysts at the broker note that the retailer delivered 15% growth through the first half, and expect a slowdown which will leave sales “broadly flat” on last year. But they add that investors willing to overlook the ongoing Serious Fraud Office and Office of Fair Trading investigations, should do well out of the chain.
SELL: CARLUCCIO'S
Seymour Pierce reckons investors should dump stock in Italian food chain Carluccio's. The broker is worried about margins because it will have to negotiate both the new tips legislation and the rise in VAT over the course of this financial year. That means Carluccio's is being forced to navigate what Seymour Pierce calls “troubled trading waters”, and analysts therefore say sell the stock, which they give a 72p target price.
HOLD: KOFAX
Panmure Gordon reckons shareholders should back Kofax. The broker upgrades shares in the company which makes software for document scanning from sell to hold, because it “might be turning a corner”. Kofax saw organic growth rise 7% at its interim results, and Panmure analysts reacted by hiking their target price on the stock from 140p to 182p.
