Market Report: Legal & General rises on takeover speculation

Bid fever seems to be showing no sign of taking a winter break and yesterday's rumours surrounded talk of an offer for Legal & General. Traders said the most likely source of a bid was its UK rival Prudential.

Although the volume on L&G was unspectacular, with just over 50 million shares changing hands, only 4 per cent higher than the daily average, traders said that all of the "right people" were piling into the stock. Traders also said a bid from a private equity group could not be ruled out as many European buyout houses still have lots of cash waiting to be invested. L&G closed 1.25p firmer at 149.5p, with traders talking about the bidding starting at 180p. Prudential actually performed better, ending the session 4.5p higher at 661.5p.

The broker Morgan Stanley believes that troubles at the pharmaceutical giants Pfizer and AstraZeneca are good news for Shire Pharmaceuticals. The UK's smallest blue-chip pharmaceutical group has had no pipeline problems, making it an attractive target for larger companies. Bridgewell also believes Shire is well positioned compared with its larger rivals as it began coverage of Shire with an "overweight" recommendation. Despite the bullish noises coming from brokers, Shire ended unchanged at 1,026.5p, while AstraZeneca ended a dreadful recent run by adding 15p to 2,905p.

The long-awaited confirmation of BT Group's entry into the on-demand home television market dented confidence in some of its competitors. BSkyB fell 5p to 520p, Cable & Wireless closed a quarter of a penny lower at 157.25p and Carphone Warehouse shed 3.75p at 271p. The latter's first mover advantage looks to have completely dried up and news that BT has signed a deal with Setanta to broadcast football took the market by surprise. BT Group closed 2.25p better at 289.75p.

In the wider market, widespread corporate activity speculation and a much stronger opening on Wall Street encouraged London investors after last week's dollar-dominated falls. The FTSE 100 closed 28.9 better at 6,050.4.

The word among mid-cap investors is that the private equity group 3i, 7p lower at 958p, is poised to formalise its bid for the support services group Enterprise, although investors are hoping for a little more than the 550p per share reported to be on the table. The shares closed 9.25p better at 550p, but traders will be disappointed if there is no premium in the bid.

Housebuilding analysts have been busy over the weekend. Merrill Lynch reiterated its "buy" recommendation on Barratt Developments before Friday's results. The US investment bank has a 1,300p price target for the shares, 47p better by the close at 1,152p. Merrill Lynch also upped its target on Redrow to 720p, sending the shares 5p firmer to 665p. But it wasn't all good news. Citigroup believes investors have got a bit carried away with takeover talks at Wilson Bowden and that the shares are now looking too expensive. It cut its target price to 2,100p as the shares shed 11p to 2,195p.

Robert Tchenguiz will have to dig deep if he is going to launch another takeover offer for bar and pub landlord Mitchells & Butlers. The word in the market is that he may be considering an offer for the company, which turned down a 550p-per-share approach in March, but that he will need to find at least another £800m. The shares broke through 700p for the first time yesterday, hitting a high of 710p, before a bout of profit-taking saw the shares close 7p better at 692p.

Disaster of the day in the small caps was biotechnology group Evolutec after key phase II trials in its hay fever treatment failed when the drug showed no improvement over a placebo. The shares were marked 26.5p lower at the opening but investors were willing to accept any price to get out, driving the shares 97p lower to 37p by the close, a fall of 72.4 per cent.

Volume in commodity broking group Commoditrade was high as a big seller came close to being cleared out of the market, and by the close 22 million shares changed hands as the shares firmed half a penny to 29p. The word among traders is that the company is up for sale but management is thought to be looking for a price north of 60p per share.

Finally, investors should be on the lookout for a new issue due to start trading on AIM tomorrow. ACM Shipping is the third shipbroker to list in London and trade is expected to be brisk after the company raised £7.6m at 162p per share via a placing by broker Noble. The placing is thought to have been 2.5 times subscribed and the shares should move to a decent premium.