Market Report: Bid talk casts Shire as buyer, not target

Traders have named the pharmaceuticals group Shire as a takeover target more times than they have taken paracetamol, but yesterday the City was overdosing on rumours that Shire was lining up a takeover of a US drug group.

Rumours circulated that Shire was interested in the US rare diseases group ViroPharma. Viro is said to have hired Goldman Sachs to run a sales process and Shire, alongside Sanofi and others, is eyeing the $3bn (£2bn) group.

Analysts at Deutsche Bank think a move by Shire would be good for shareholders and said: “Whether or not Shire has actually approached ViroPharma is unknown at this point. However, a combination of the two companies makes both strategic and financial sense, in our view.”

The wider market agreed and Shire was 56p better at 2,533p.

Staying with pharmaceuticals, GlaxoSmithKline won a priority review from US regulators for its combination treatment for malignant melanoma, but ended the day 8p worse off at 1,614p.

The wider market was in a good mood despite a chilly autumn day, and news from the US that former Treasury Secretary Larry Summers had pulled out of the race to replace Ben Bernanke as chairman of the US Federal Reserve was viewed as good for the markets. Mr Summers’ exit leaves Fed vice-chair Janet Yellen as front-runner to take the top job, and analysts feel Ms Yellen is less likely to taper off the Fed’s programme of fiscal stimulus, which has been boosting markets worldwide.

The receding spectre of military action in Syria also helped keep the mood broadly optimistic.

The FTSE 100 was 39.06 points better at 6,622.86.

Airlines were gainers as oil prices fell in response to the Syrian situation. British Airways and Iberia owner IAG added 10.3p to 325p. EasyJet put on 31p to 1,331p. On the small-cap index, Flybe chief executive Saad Hammad has begun organising the internal structure at the business to save costs, but the shares were unmoved at 89p.

Results for miners were mixed as better gold and metal prices helped sentiment. The Chilean copper miner Antofagasta was top of the table, up 33.5p to 883p. But the Mexican metals miner Fresnillo slumped 153p to 1,045p and was buried at the bottom of the blue-chip index.

The former Rio Tinto chief executive Tom Albanese has returned to the mining industry and is joining Vedanta Resources in an advisory role that will see him be “actively involved in developing the company’s strategy, policies and growth objectives”. Vedanta ticked up 23p to 1,183p.

The mid-tier media and events company UBM slipped 9.5p to 737p after the surprise announcement that its chief executive David Levin would be leaving next year.

The troubled coal miner Bumi, which plans to split with the Indonesian Bakrie family that co-founded the company, said its separation should be completed by November. The group which was put together by City financier Nat Rothschild was 4.9p better at 209.4p.

Analysts at Canaccord Genuity thought Petra Diamonds was a sparkler. Despite strikes at its mines in South Africa, the precious stones miner’s full-year results were in line with expectations and Canaccord maintained its buy rating. But investors didn’t agree and it lost 3.4p to 117.4p.

The AIM-listed Noricum Gold, the Austrian-focused gold exploration and development company, announced it had struck high-grade gold and silver during the initial drill at its 100 per cent owned Rotgulden project and it was 0.075p brighter at 1.15p.

Potash specialist Sirius Minerals said it has altered its strategy to get approval for its flagship project in the North York Moors and it tumbled 2.43p to 9.82p.

There was better news at oil and gas explorer San Leon Energy, which unveiled positive drilling updates in Poland’s northern Baltic basin and it pushed ahead 0.2p to 5.45p.

Premier African Minerals surged 0.7p to 1.75p when it issued an upgrade to its recent preliminary economic assessment and mining study. It said it was in discussions with potential funders for its flagship RHA tungsten project in Zimbabwe.

Rialto Energy agreed a deal with Ivory Coast’s energy ministry to replace its existing contract for a block at one of its sites, and it was 0.205p better at 1.725p.

Buy: EKF DIAGNOSTICS

Snap up shares in EKF Diagnostics Holdings, Canaccord Genuity suggests. The broker says the healthcare testing group has moved from an “acquisition-focused vehicle” to a broad-based diagnostics business with a “portfolio of rapidly growing products”. So Canaccord rates it a buy with a 42p price target for shares that are at 28.5p.

Sell: RECKITT BENCKISER

Flog shares in Reckitt Benckiser, Liberum Capital advises. The broker thinks its “below-average exposure to emerging markets”, the fact that it is “undergoing a shift in strategy” and volatility in its healthcare unit are reasons to sell. Liberum gave it a 3,700p price target for shares that are around 4,548p.

Hold: PARAGON GROUP

Hang on to shares in Paragon Group, Peel Hunt recommends. The broker reckons its £273m securitisation that was launched last week “re-iterates the continued momentum in the underlying business”. But for now Peel rates it just a hold with a 339p price target for shares trading at 91.5p.