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Tullow rises on renewed bid talk as FTSE ends its five-day losing streak

Thursday, 6 February 2014 - 8:35am IST | Agency: Daily Telegraph
The FTSE 100 closed up 8.62 points at 6,457.89, a modest but significant gain as it brought to an end a five-day losing streak by London's benchmark index.

The FTSE 100 closed up 8.62 points at 6,457.89, a modest but significant gain as it brought to an end a five-day losing streak by London's benchmark index.

Tullow Oil was again the focus of dealing-room chatter following a revival of speculation that Norwegian energy group Statoil is eyeing an approach.

The rumour is not new and, as recently as last month, sent shares in the Africa-focused oil explorer higher. But, despite the somewhat tired nature of the speculation, renewed talk of a bid at pounds 14 a share caused a spike in Tullow's share price in afternoon trade, when the gossip began to circulate.

The explorer finished the session up 56 at 8491/2p, a 7.1pc gain that was the biggest of any company in the FTSE 100. One dealer noted that Tullow often attracts takeover chatter when its shares look particularly cheap. On Monday, the explorer closed at 785p, its lowest level since April 2009.

The shares traded above pounds 16 in early 2012 but a string of dry wells put a dent in Tullow's once-impressive exploration track record and knocked the market's confidence in the group.

While Tullow was boosted by bid talk, Vodafone fell 2.65 to 215.9p after analysts poured cold water on lingering speculation that US telecoms giant AT&T would one day snap up the British group. AT&T cannot make an offer for Vodafone for at least six months, after the American company was forced to deny it was interested in the FTSE 100 group following a request for clarity by the Takeover Panel.

Nevertheless, Vodafone's share price still includes a bid premium, analysts at Societe Generale said. Noting that a Vodafone takeover would have to be approved by AT&T shareholders, the experts at the French bank highlighted that a deal would dilute the US company's earnings-per-share.

The uncertain outlook for Europe's mobile sector would also make a transaction a "hard pitch" for AT&T management to make to shareholders, the SocGen analysts said. They concluded that a deal was unlikely.

RSA Insurance, 4.6 higher at 103.6p, was a strong riser on hopes the troubled group was more likely to pursue disposals - to plug the pounds 200m black hole at its Irish division - with ex-Royal Bank of Scotland boss Stephen Hester at the helm. That would be better for shareholders, as asset sales would lower the amount RSA might seek from a rumoured rights issue.

Mr Hester has previously demonstrated "a willingness to identify and sell or exit from assets or businesses which don't naturally fit", Deutsche Bank analyst Oliver Steel told clients.

While RSA may not sell its Scandinavian, Canadian, or Latin American businesses, the arrival of Mr Hester "does suggest that we could see quicker and better executed disposals or exits from more peripheral areas: not just Central and Eastern Europe, Baltics, Asia and the Middle East, as we had previously assumed, but also potentially now Italy as well", Mr Steel said.

"The combination of these - and perhaps a little more leeway from rating agencies - would suggest that the amount needed to be raised in the form of new equity could also now be lower than previously assumed."

Hargreaves Lansdown brought up the rear in the FTSE 100 with a drop of 152p, or 10.2pc, to pounds 13.45 in the wake of a disappointing first-half results announcement.

But Homeserve, the house repairs and insurance business, put on 15 to 322p after updating the market on its latest trading.

Shares in the group fell as much as 7.1pc a day earlier, before the statement, only for the group to please the market.

Analysts at Jefferies noted that "the tone around customer wins and retention, especially in the UK, has improved".

Staying with the day's risers, Ashmore, the emerging markets (EM) focused fund manager, was lifted 16.8 to 334.4p by Canaccord Genuity analyst Arun Melmane, who raised his recommendation on the group to "buy" on the basis that the EM volatility is "more than baked-in" to the shares.

Similarly, Lloyd's of London insurer Hiscox advanced 27 to 6511/2p following an upgrade to "buy" from "reduce" at Nomura, a so-called "double upgrade" that skipped out the intermediate "neutral" rating.

"In a downbeat rates environment, [Hiscox is] a key holding, given its diversified business mix and strong track record of performance," analysts at the Japanese bank said, adding that its "valuation relative to prospective returns does not appear as stretched as had been the case in the past".

As usual, there were eye-catching moves among the smaller companies.

Amedeo Resources surged 96.9pc, a rise of 0.775 to 1.575p, after announcing that Jiangsu Yangzijiang Offshore Engineering, in which it indirectly holds an 18.6pc stake, had secured a contract to build two drilling platforms for Primepoint Drilling.

The order also includes an option to construct two further platforms and, in total, the agreement is worth about $1.7bn.

The announcement from Richland Resources that it had signed a memorandum of understanding with an Australian group jointly to develop their graphite assets in Tanzania sent shares in the London-listed minnow up 0.375, or 11.1pc, to 33/4p.

Finally, the bears continued to get the better of beleaguered online video search group blinkx.

Shares in the Aim-listed company slid a further 51/2 to 1071/4p, a 4.9pc fall that came on top of a 14.9pc drop a day earlier when influential short-seller Carson Block revealed he was betting against the group.

SunGard, which compiles data on stock borrowing, said the proportion of blinkx shares on loan had climbed nearly 40pc since early January.




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