Market Report: Compass heads north on disposal rumours

Investors welcomed suggestions that Compass might be tempted to dispose of its network of railway and airport food kiosks. The speculation helped shares in the catering giant gain 4.5p to 232.75p, despite denials from Autogrill, the Italian motorway-restaurant operator, that it was interested in buying the business.

"Although Autogrill has ruled out making any acquisitions for now it would not be a surprise to see Compass trying to sell its travel concessions division," one analyst said. According to yesterday's dealing-room chatter, Compass could raise as much as £700m from a deal.

Dresdner Kleinwort Wasserstein seemed to suggest that such a price tag is certainly achievable, and argued that equally important as the price the company would get for the business is the amount it would save. The German broker estimates that if Compass were to hive-off the unit it could save up to £60m a year in capital expenditure.

In Dresdner's view, such a move would be great news for Compass as it would leave the group better able to focus on its more profitable contract catering activities. But the broker warns investors not to get too excited about a disposal. Dresdner calculates it will not free up enough cash for a return of capital to shareholders.

Meanwhile, BOC ticked 7p better to 1,155p after the chairman of BASF, Jürgen Hambrecht, refused to comment on rumours that his company is plotting a bid for BOC. "Absolutely no comment," he is reported to have told journalists when questioned about a tie-up with UK industrial gases group. For the past month, traders have seemed convinced that BOC's days as an independent entity are numbered, and yesterday's outright refusal by Mr Hambrecht to comment on the speculation only bolstered their stance.

Alliance UniChem jumped 29.5p to 870p, making it the best performer in the FTSE 100, as dealers reported talk that a number of private-equity funds are running the slide rule over the company with a view to buying it. Alliance UniChem shares stand at an all-time high. Over the past seven sessions they have performed particularly strongly, losing ground just once.

Again on the merger and acquisition front, Morgan Crucible added 4p to 215p as rumours of a 260p-a-share offer for the engineer circled dealing rooms. Laird, 3.25p better at 361.75p, is another engineer which has seen its shares boosted by takeover rumours during the past few weeks. However, after yesterday's director share sales, market professionals said they were sceptical that a deal is on the cards any time soon.

A weak start to trading on Wall Street pushed the FTSE 100 index 5.8 points lower to 5,447.3. Something of a buzz surrounded MFI Furniture, 0.25p weaker at 114.75p, as it emerged that Goldman Sachs has built a 14 per cent stake in the retailer. Analysts believe the US broker holds the shares on behalf of a number of its hedge-fund clients. They suggested that if the these funds are betting on MFI being taken over in the near future, they will be disappointed. The retailer's £245m pension-fund deficit also makes a buyout of the company quite unlikely.

Burren Energy was driven 22p higher at 846p by Merrill Lynch, which started coverage of the oil explorer with a "buy" stance and a 12-month price target of 1,015p. The broker believes that Burren's oilfields in Turkmenistan and Congo may soon have to be upgraded in size, and tipped the group as very likely to attract the eye of a predator.

After last week's massive profits warning at Deal Group Media, yesterday saw Adrian Moss, its chief executive, try to shore-up confidence in the online advertising group. Deal Group Media rose 0.5p to 8p yesterday as Mr Moss bought 500,000 shares at 7.75p.

There was also director share-buying at Imagesound, 1p better to 9.75p. Leading the way was Derek Mapp, the chairman of the in-store music and television specialist, who picked up 200,000 shares at 8.8p. Three other directors snapped up a total of143,000 shares at the same price. Domino's Pizza ticked 1p higher to 316.5p on talk of strong trading at the group.

Griffin Mining ticked 2.5p higher to an all-time high of 48p on the back of a positive drilling update from its site in China. Accident Exchange rose 22p to 353.5p after the group secured three contract wins and expended a fourth agreement with an existing client.

Finally, CDS Oil & Gas enjoyed a solid debut on AIM. The Paraguay-based explorer raised £2.4m through a placing of new shares at 10p, and saw its stock close at 11.5p. This gives CDS a market value of more than £28m. The company will use the money raised to drill its first appraisal some time this year.