The Independent (UK): Shares and market report: Gallaher and SSL are tipped for takeover in 2005: “BG, up 2.75p to 354p, was again rumoured to be a likely target for Shell or France's Total. This story did the rounds of dealing rooms in February and sent BG stock soaring. Although the bid failed to materialise, shares in the oil group held on to their gains and went on to touch a high of 380p in October. Whether BG's valuation is now too rich for a predator only time will tell.” (ShellNews.net) 1 Jan 05

Michael Jivkov

Jan 01, 2005

AMONG THE few traders at their desks in the City yesterday most spent the last half-session of the year talking about which companies were most likely to be taken over in 2005. In the FTSE 100, top of the majority of players' lists was Gallaher, down 1.5p to 791.5p. Although the stock succumbed to light profit taking yesterday after an awesome performance last month, traders were convinced it would not make it to the end of this year as an independent company.

Japan Tobacco was seen as the most probable buyer of the group. JT, which has extensive operations in Europe, said in October it was looking at a number of acquisitions and hinted that it would like to increase its presence in the UK.

Elsewhere in the blue-chip index, players bet on a private equity break- up bid for Rentokil, up 1p to 147.75p. This was a favourite rumour of traders last year but more serious analysts have suggested that private equity firms may struggle to raise the debt finance required for such a deal, given Rentokil's relatively weak fixed asset base. More likely private equity bid candidates are Trinity Mirror, up 2p at 636p, and GUS, steady at 938p.

BG, up 2.75p to 354p, was again rumoured to be a likely target for Shell or France's Total. This story did the rounds of dealing rooms in February and sent BG stock soaring.

Although the bid failed to materialise, shares in the oil group held on to their gains and went on to touch a high of 380p in October. Whether BG's valuation is now too rich for a predator only time will tell.

Smith & Nephew, down 2p to 533p, was another bid favourite. After failing to buy its Swiss rival Centerpulse, the medical devices group has been viewed as vulnerable to a takeover, with most analysts expecting any move on the company to come from the US. However, top of most traders' takeover lists was SSL International, which rose a further 1p to 315p.

Meanwhile, Cairn Energy was driven 10p higher to 1,090p as bears closed their short positions in the stock. Those who turned negative on the stock before last month's drilling news from the oil and gas explorer were likely to have had a very merry Christmas.

Shares in the group slumped 25 per cent in the wake of the update, which not only failed to contain any new discoveries at its Rajasthan fields but brought news of a new tax demand from the Indian government on the company.

According to bears, Cairn was ripe for shorting before its statement for two reasons. First, its shares had already risen 300 per cent in the previous 12 months, meaning there was already a lot of hope priced into the company's valuation. Second, a week before the update, Cairn, for the first time in years, put out a statement simply alerting investors to the fact that it would be issuing a drilling update in seven days. Bears viewed this as an opening move by a company trying to massage down market expectations.

In its final session of 2004, the FTSE 100 index retreated 5.8 points to close at 4,814.8. In 2003 the index registered a 7.5 per cent rise.

Intermediate Capital ticked 1p higher to 1,090p after its chairman, John Manser, bought pounds 12,000 worth of stock in the leverage buyout specialist at 1,090p.

Among small caps, Incisive Media rose 2p to 148p on talk of strong trading across its three principle divisions. Bulls of the stock believe analysts will soon have to upgrade their forecasts. Gossips also reckon business is booming at Babcock International, up 3.5p to 136.5p. Sales at its recently acquired Peterhouse division rose about 25 per cent on the year.

Axis Shield jumped 2p to 244p after Paul Garvey, its finance director, disclosed the purchase of 5,000 shares at 244p. There was also director share buying at Real Affinity, steady at 0.82p. Mark Richardson, the chief executive, picked up 650,000 shares at 0.82p, while fellow executive Gerard Corcoran bought a more modest 350,000 at the same price.

Ovoca Resources, unchanged at 7.65p, posted first-half figures that showed widening losses. Last week the stock was boosted by talk that a number of mining sector heavy hitters were poised to join the board of the gold exploration tiddler. Yesterday's results statement contained no such news. However it did emerge that the investor Tom O'Gorman had used Ovoca's share price strength to cut is shareholding in the company to 7.4 per cent from 11.8 per cent.

Finally, even on New Year's Eve there was a new issue on AIM. Servision, describing itself as developer and supplier of video communications products, did not raise any fresh cash but saw its stock close at 85p. This values the company at pounds 15m.

http://news.independent.co.uk/business/analysis_and_features/story.jsp?story=597195

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