Market Report: SABMiller enjoys a Stella day on Inbev bid talk

SABMiller, the company behind the Carling Black Label and Peroni branded beers, swung to the top of the FTSE 100 yesterday after market speculation suggested some bid interest from Inbev, the Belgian brewer behind Stella Artois.

The talk was sparked by weekend reports, according to which if Inbev fails to buy Anheuser Busch it may switch tack and pursue SAB to consolidate its position in the global beer industry.

Weighing in on the rumours, Merrill Lynch said that while a deal between the two companies posed limited anti-competitive issues and offered regional scale synergies, it "seems or feels largely hypothetical [in the] near term".

The broker said: "If this deal is to be believed, it suggests SABMiller has more upside than Inbev".

SAB fizzed 85p, or 6.94 per cent, higher to 1,309p.

Elsewhere, Sanford C Bernstein gave strength to the Kraft-for-Cadbury rumours. The market has been full of talk the US food and beverages giant Kraft may approach Cadbury in a bid to take on the Mars-Wrigley combine. The rumours proved especially potent last week, and yesterday Bernstein added fuel to the fire, noting that the acquisition would make "the best strategic sense" for the American company. "... Kraft is increasingly faced with a 'fish or cut-bait' decision in confectionery," the broker said. "... acquiring Cadbury would provide global leadership, with even more international focus and even faster growth categories like gum. Management's desire to focus on its existing recovery plan, plus still a fairly weak balance sheet, might be big short-term impediments, but Cadbury will only get more expensive as it delivers on its margin improvement plan."

The M&A talk took Cadbury up by 16.5p to 704.5p.

The FTSE 100 was down 28.8 at 6,058.5p after oil companies fell as the price of crude slipped off earlier highs. BP was down 13.5p at 616.5p, claiming fifth place on the loser board, while Cairn Energy lost 72p to 3,371p and BG shed 20p to 1,290p. The FTSE 250 was down 43.3 at 10,034.2.

On the FTSE 100, most of the mining sector remained weak. Rio Tinto was down 121p at 6,178p, BHP Billiton lost 38p to 1,972p, Xstrata shed 49p to 4,009p and Antofagasta fell 7.5p to 686p.

Among banks, Royal Bank of Scotland was the worst off, losing 5.5p to 241.25p. Alliance & Leicester, on the other hand, was up 11p at 427.25p, thanks to persistent bid speculation. Last week, the company was cast as a potential target for Barclays and Lloyds TSB.

Barclays was up 4.75p at 390.75p and Lloyds lost 1.5p to 393.5p yesterday.

Compass claimed third place on the FTSE 100 leader board, adding 11.5p to 373.25p, after Credit Suisse raised its target price for the stock to 425p from 415p. "In our view, the group risk profile has been notably reduced over the past two years. Concession catering and vending have been sold, meaning Compass is now a more focused contract caterer," the broker said.

On the FTSE 250, Yell was buoyed by Microsoft bid rumours. According to the grapevine, the software giant was mulling a 220p-per-share bid for the directories group. The talk lifted Yell 2.5p to 128.5p.

Barratt Developments fell 9.25p to 210.75p. Traders blamed the weakness on reports of a placing of 7 million shares in the company at 208p each by Citigroup.

The rest of the sector was also weak as investors continued to worry about the state of the housing market.

Taylor Wimpey lost 0.75p to 95.75p, Bovis Homes was down 5.5p at 455.5p, Bellway fell 9.5p to 633.5p and Redrow was down 3.75p at 234.5p.

The residential property developer Grainger shed 5.94 per cent or 20.25p to 320.75p following market speculation that the company may breach its debt covenants.

"Having only had [first- half] results last Thursday when Grainger showed its current positive covenant situation, we do not subscribe [to the speculation]," said Cazenove. "There are two covenants over the debt that we are aware of, which we believe have sufficient headroom to give us comfort."

The construction group Morgan Sindall lost 31.5p to 949p after Citigroup initiated coverage on the stock with a "sell" rating and a 900p target price.

"[The] Fit Out [division] and Affordable Housing [division] are likely to come under pressure," the broker said. "Fit Out only has four-five months' visibility and is heavily exposed to financial services and retail and leisure in London. The Affordable Housing division is exposed to the deteriorating UK housing market."

On AIM, Southampton Football club parent Southampton Leisure Holdings was down 8.82 per cent, or 3p, to 31p after confirming the termination of offer talks. The news follows Southampton Leisure's February announcement that it was in discussions with a third party in relation to an investment in, or a possible offer for, the company.