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MARKET REPORT: French engineer an Invensys deal

British engineering firm Invensys featured in one of the most fascinating corporate deals of 2012 when it sold its UK signalling division to German giant Siemens for £1.74bn, which at the time was equivalent to the group’s total market capitalisation.

The out-of-the-blue deal left the market shell-shocked and the group ‘in play’ to a takeover. Shareholders were happy as Larry though as they could look forward to a cash hand out of 76.7p per share.

Yesterday, buyers chased Invensys up to 368p on hearing that US activist hedge fund ValueAct Capital has amassed an 8 per cent stake, before it closed 6.4p higher at 364.8p.

Dealers are convinced that things are hotting up and hot gossip now is that French electrical equipment group Schneider Electric is working on a £4bn, or £5 a share, cash offer for the company. With Sir Nigel Rudd as chairman, anything is possible. He has been on the board of several companies that have eventually succumbed to a foreign takeover.

Expectations that the European Central Bank will cut interest rates by 25 basis points on Thursday helped the Footsie close 31.6 points higher at 6,458.02. The US Federal Reserve Bank also starts its two-day policy meeting today following a government report last week showed the world’s largest economy expanded less than economists’ forecast. The authorities are keen to keep the economy on track and so the Fed is likely to talk less about tightening. Wall Street traded 30 points higher in early trading.

  More... FTSE CLOSE: Blue chip market remains strong Market report brought to you in association with Killik & Co. For market advice check out killik.com

Lloyds Banking Group, in which the UK tax-payer owns 41 per cent, edged 0.59p ahead to 53.5p ahead of today’s first-quarter trading statement. Shore Capital expects an improvement in group pre-tax profits to £0.9bn, primarily owing to a reduction in losses in the non-core business to £0.7bn with core business profit held broadly stable at £1.6bn.

The bank yesterday announced it has agreed to sell its Spanish retail banking operations to Banco Sabadell. Selling sympathy with Balfour Beatty’s shock profits warning dragged Carillion 17.1p lower at 272.7p.

Shrugging off last week’s news that respected international sales director Jon Kamaluddin was stepping down, online fashion group ASOS jumped 88p to 3076p in front of today’s interim results. Broker Cantor forecasts pre-tax profits of £25.5m, against consensus £24.7m, while forecasting £52m for the full-year. Danish supplier BestSeller holds 28 per cent of the equity and is edging up to the 30 per cent bidding threshold.

Demand ahead of first-quarter figures on May 8 lifted fashion retailer Next 12p higher to 4420p with dealers expecting a continuing strong performance from its online offering.

Travel company Thomas Cook relinquished a penny to 130.5p after confirming that the merger of its flight operations, Condor Flugdienst and its wholly owned subsidiary Condor Berlin, will be completed on May 1. Oil and gas services provider ViaLogy firmed 0.18p to 1.42p after announcing a collaboration deal with CGG, a geoscience company based in France.

of AFC Energy, the Aim-listed industrial fuel cell power company, advanced 2.75p to 29p after extending the longevity of its electrodes to more than nine months of continuous operation.

Shaft Sinkers was sold down to 32.1p before closing 5.5p, or 13 per cent lower, at 37p after reporting a 75 per cent decline in full-year profits as a result of operational difficulties and the depreciation of the rand. The majority of its South African clients were affected by labour disputes throughout 2012.

Innovation Group improved 0.5p to 26.25p after announcing a significant strategic partnership with AXA France. Panmure Gordon lifted its target price to 38p from 36p.

Highly speculative Shanta Gold closed flat at 14.88p after it hedged 30.000 ounces of gold in 2013 at a price of $1429 an ounce, which amounts to 43 per cent of 2013 production at a price 2 per cent below spot. Peel Hunt is positive and regards it as a prudent move given the current debt repayment schedule and 2014 commitments.

Mediterranean Oil & Gas edged up 0.12p to 8.12p on a RBC Capital recommendation and target price of 13p. The broker says MOG has a portfolio with the potential for significant development-led and exploration-led growth off shore Italy.

Coms attracted revived speculative support and touched 3.05p before closing 0.45p, or 22 per cent higher, at 2.52p. Buyers have chased the internet telephony group higher on hearing that it has signed a contract to sell broadband and lines to an as-yet-unnamed outsourcing company with a turnover in excess of £2bn.

Ithaca Energy closed flat at 107p despite announcing that the Storbarden exploration well on the PL 5065 licence in Norway has failed to encounter hydrocarbons and the well is to be plugged and abandoned.

Ubiquitous support services company Restore added a penny to 127.5p after announcing the acquisition of IT Efficient, the national IT asset disposal and recycling business.

The deal comes hard on the heels of the purchase of UK office supplies group File and Data.

Chief executive Charles Skinner is driving the group forward, backed by £7m of cash raised in a recent oversubscribed rights issue at 111p a share.

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