Market Report: Takeover speculation fires up National Grid

A bullish trading session in London was boosted by another set of takeover rumours, reigniting the corporate activity speculation that has driven the London market for much of the past 12 months.

National Grid, despite rising from less than 400p in early 2003 to 577p, up 6p yesterday, has underperformed the wider market over the past three years. Shares in the water, gas and electricity utility were snapped up as rumours of a bid from its Spanish rival Endesa did the rounds, with traders talking of a possible 750p-a-share offer coming within "the next few days".

With an enterprise value of more than £28bn, including more than £14bn of debt, National Grid would be a mighty big fish to swallow, and some traders dismissed the bid talk. One said: "If anything, there is probably more chance of National Grid being a suitor, with Endesa caught up in the bidding for Gas Natural and looking like it might come off second best to E.ON, there might be an opportunity for National Grid to shake-up the whole process."

Elsewhere there was talk that Kesa Electricals, the owner of the electronic goods retailers Comet in the UK and Darty in France, has again been approached by a consortium of private-equity bidders. Just over a month ago it turned down a £1.72bn bid, thought to have come from the buyout houses Permira and Kohlberg Kravis Roberts.

Traders said Permira and KKR could come back with a slightly higher offer, about 340p a share, which would have a better chance of success given the lack of positive newsflow from the company in the intervening weeks. Kesa shares closed 15.25p better at 322p.

The long-running Crédit Agricole bid for Alliance & Leicester, up 8p at 1,154p, was also back in focus, with the board of A&L rumoured to be considering another informal approach. The board is believed to have turned down a 1,300p-a-share offer in March, and is thought to value the mortgage bank at 1,500p. One analyst said: "There has been a lot of downbeat coverage of the mortgage-banking sector in recent weeks and if Crédit Agricole executives are prepared to pay any more than 1,300p for Alliance & Leicester then good luck to them."

In the wider market, the FTSE 100 enjoyed a strong end to the shortened week's trading, with miners bouncing back after yesterday's sell-off. The Chilean copper miner Antofagasta led the way, adding 120p to 2,468p, as the copper price hit yet another all-time high.

Xstrata, firmed 91p to 2,087p on the back of a bullish broker note from UBS on Thursday, with a target price of 2,400p, while Rio Tinto brushed off Thursday's worse-than-expected iron-ore production figures to close 87p higher at 3,162p. JP Morgan became the latest broker to increase its price target for Rio. Among mid-cap miners, Aquarius Platinum added 31p to 790p, with some traders saying that the stock has lagged behind its peers and a rally to more than 900p could be on the cards.

Good demand for mining and oil stocks saw the FTSE 100 sail past 6,100 and, supported by a decent opening on Wall Street, the index closed 51.3 better at 6,132.7.

Brokers and dealers continued to applaud the moves made by Cairn Energy to bring the demerger of its Indian operations closer, bidding the stock 78p higher to 2,399p, another all-time high.

Housebuilders have been out of the corporate-activity limelight for a few weeks, but the sector was back in focus yesterday on the back of talk of an 1,850p bid for Wilson Bowden. The sector remains many traders favourite for a bout of consolidation, although Wilson Bowden shares finished the session off the highs at 1,572p, up 27p, having hit 1,595p earlier.

The star performer in the small-cap sector was Eurasian Mining, as it confirmed a previously unknown alluvial platinum deposit in its West Kytlim project in the Central Urals of Russia. Its shares more than doubled in value, closing 4.37p higher, or 116.5 per cent, at 8.12p. Meanwhile, traders will be looking out for results from the exploration and production minnow Sterling Energy, due on Tuesday, with bulls hoping for more positive news from its offshore operations in Mauritania. Sterling shares closed 0.25p better at 27.25p on heavy volume, with nearly 6 million shares changing hands.

Outstanding results from the student accommodation group Ely Property saw its shares close 0.75p better at 4.62p. Turnover was up 213 per cent to €4.5m and pre-tax profits surged 56.8 per cent to €1.3m.

Finally, the online advertising group Burst Media enjoyed a decent opening on its first day of trading on AIM, having been placed with institutional investors by Altium Securities. The company raised £38m, and its shares closed at 87.5p, a 6.7 per cent premium from the placing price of 82p.