Takeover talk sweetens market

CADBURY and International Power saw contrasting fortunes yesterday with both firms under the takeover spotlight.

Shares in the chocolate maker passed 800p as investors bet on a higher offer today from US giant Kraft, but IP slid more than 3 per cent as talks over a possible tie-up with France's GDF-Suez ended.

The wider FTSE 100 index made decent progress, up 39 points to 5,494.4, although there was little direction from US markets, which were closed for a public holiday.

ETX Capital senior trader Mic Mills said: "Investors took the opportunity to squeeze the market higher in the absence of any US interest but, with a welter of earnings news to come this week, the trend might not be your friend for long."

The pound, meanwhile, was trading above 1.63 against the dollar, while worries over Greece's fiscal position helped sterling to hit a four-month high of almost 1.14 against the euro.

But it was merger and acquisition activity that grabbed attention in dealing rooms with Kraft thought to be preparing an offer of between 820p and 830p a share, which would value Cadbury at up to 11.4 billion.

Cadbury shares were 14p higher by the close of play but, at 807.5p, this was below the rumoured price as investors cast doubt on Kraft's chances of success. Shareholder Standard Life Investment said Kraft would need to pay 900p.

Takeover speculation also caused shares in International Power to rise by 10 per cent at one stage before plummeting back down in a reversal of fortune.

The power company was the subject of talk about a tie-up with France's GDF-Suez, including a possible takeover.

IP shares were at the top of the risers' board, but finished the day in the doldrums after it said the talks were over. Shares ended the day down 11p at 311p.

Elsewhere, miners enjoyed another strong session after Eurasian Natural Resources lifted 38.5p to close at 1,030p, and Anglo American cheered 86.5p to end the day at 2,809p.

Retailers were on the risers board even though broker Citigroup reduced its price target on six retail stocks. Marks & Spencer shares, which have been battered in recent days, recovered 11p to 360.6p, while Home Retail Group – which owns Argos and Homebase – rose by 6.7p to 267.8p.

In other retail news, internet fashion firm Asos slipped 7 per cent as it reported a slowing in sales growth over the five weeks to the start of January. Sales were up 30 per cent for the period, but analysts noted this was below the trend reported in November. Shares were 33p lower at 435p.

Back in the top flight, BSkyB fell 1 per cent – down 6.5p to 567p – after BT said it planned to undercut its rival on the price of its Sky Sports channels if a regulatory inquiry forces the pay-TV firm to drop its wholesale charges.

Tullow Oil rose after the oil explorer said it was close to the biggest deal in its history by exercising rights to buy 800 million of Ugandan oil fields. Shares lifted 30p to 1,369p.

Edinburgh-based oil and gas explorer Melrose Resources was also on the rise – up 5 per cent or 15.9p at 336.9p – after a share tip in a Sunday newspaper sent retail buyers towards the stock.

Oil rose above $78 a barrel, ending a five-day run of falling prices, having dropped to $77 earlier in the session.

Wind power outfit Sea-Energy also posted an increase – up 3 per cent at 63.5p – after it was revealed that, on 8 January, director Joel Staadecker had sold 10,000 shares in the Aberdeen-based company at 73.5p each.

Livingston-based software firm Craneware ended the day down 9.5p at 354p despite reporting a rise in profits and revenue.