Vodafone weighs on the FTSE

J Sainsbury outperformed a flat London market on Tuesday on talk it could be a takeover target for a private equity house.

Its shares gained 0.6 per cent to 435p after Numis Securities reiterated its “buy” rating, citing the attraction of its property portfolio to a bidder.

Although Sainsbury shares have risen 60 per cent in the past two years, its enterprise value (£9.1bn) is not much higher than the market value of its freehold properties (£7.5bn).

Numis believes this is unlikely to have escaped the attention of the venture capital industry.

“A financial buyer prepared to do a full sale and leaseback on the properties could afford to pay 600p-a-share and generate an acceptable return,” the broker said.

In the wider market, leading shares closed almost unchanged with strength in the mining sector offset by a weak performance from Vodafone, which slipped 1.3 per cent to 147p ahead of a trading update on Wednesday.

The FTSE 100 finished 2.1 points higher at 6,242, while the FTSE 250 climbed 26.3 points, or 0.2 per cent, to 11,131.

Market turnover remained poor, with only 2.6bn shares changing hands.

British Energy was the day’s main speculative feature, with its shares the victim of an aggressive bear raid. They closed 3.9 per cent lower at 444p as rumours swirled of further problems at its Hinkley Point and Hunterston nuclear power stations.

Traders said BE shares had also been hit by falling wholesale power prices.

In the same sector, bid rumours helped Scottish & Southern Energy hold firm at £14.75, while Drax Group rallied 2.2 per cent to 690½p as investors eyed its chunky dividend yield.

Drax shares have been a poor performer of late, falling 15 per cent since the start of the year. However, they are still well above the 500p level they relisted at in December 2005.

Cadbury Schweppes rose 1.4 per cent to 576½p as several speculative rumours did the rounds. Predictably there was a private equity bid rumour and also talk that the company might spin off its soft drinks business. Traders said Cadbury had also been helped by a push from US broker Sanford C Bernstein.

Smith & Nephew improved 1.8 per cent to 577¾p, buoyed by strong results from US rival Zimmer which analysts noted came hot on the heels of good figures from Stryker, another US medical devices company. As such, they believe next week’s full-year results statement from S&N should impress.

On the downside, Imperial Tobacco faded 0.8 per cent to £21.07 on worries that it was lining up a bid for Spanish rival Altadis.

In a trading update, Imperial was uncharacteristically vague on its share buyback plans. Analysts said this could be a sign that the company was keeping its powder dry for a large acquisition.

Among the mid caps, bid rumours continued to swirl around Bodycote, 4.7 per cent higher at 267½ p. There was also a speculative buzz around Cookson. Its shares finished 2 per cent higher at 617p.

Recruitment consultant Michael Page rose 2.8 per cent to 477p after Bridgewell Securities drew attention to a large increase in job vacancies on the company’s website.

Misys, the software company, faded 1.9 per cent to 236p as Dresdner Kleinwort placed 22m shares at 235.5p.
source:www.ft.com