Market Report: Boost for Hilton as Icahn checks in to Fairmont

The hotel sector was back on bid alert yesterday after news of an overture to Fairmont Hotels and Resorts in the US from the financier Carl Icahn. The development sent investors rushing to get exposure to players on this side of the Atlantic and drove Hilton Group, up 9.5p to 346.75p, to the top of the FTSE 100 leaderboard. Elsewhere, InterContinental Hotels rose 11.5p to 812p, while Millennium & Copthorne added 6.75p to 388.75p.

Hilton Group is already in talks with its US sister company aimed at the reunification of the Hilton brand after more than 40 years. Such a deal is likely be worth up to £3.6bn to Hilton Group and would leave it to focus on its faster growing Ladbrokes betting business.

There were suggestions yesterday that a rival bidder may be sitting in the wings looking to spoil the party for the US Hilton. The business was split in 1964, with the US company running all Hilton hotels stateside and the UK company operating the brand elsewhere. However, the two have retained close links and analysts argue this makes a counter-bid improbable. Over the years, the two companies have sustained joint marketing, reservation and loyalty programmes.

Elsewhere in the leisure arena, Whitbread, which recently sold its Marriot chain, rose 7p to 952p before tomorrow's trading statement. Brokers have long argued that Whitbread is vulnerable to a break-up bid, viewing the company's various brands as worth far more individually than under the current structure. Among them is Numis Securities, which believes that significant value can be realised for shareholders via the disposal of the David Lloyd Leisure, Costa Coffee and Pizza Hut businesses, leaving Whitbread to focus on budget hotels and restaurants.

So far, however, all this talk of a break-up bid has come to nothing and Whitbread shares have drifted to the extent that last week the stock was relegated from the FTSE 100 in the latest quarterly review of the blue-chip index. In the absence of corporate action the stock could drift lower, especially as many analysts predict that the company has experienced a slowdown in trading since the first half.

PartyGaming dropped 7.5p to 128p after Lehman Brothers reduced its stance on the internet casino group from "overweight" to "underweight". The US broker reminded clients that the shares have risen by 74 per cent since October and labelled the stock as "overbought". In the short term, Lehman warned that PartyGaming shares could be undermined by negative news on the progress of the lawsuit recently launched against the company by its rival Empire Online.

In the retail sector, both HMV, down 7.5p to 182.25p, and WH Smith, 13p weaker at 416.75p, suffered at the hands of Credit Suisse First Boston. The Swiss broker downgraded its recommendation on both stocks to "neutral" from "outperform" and expressed worry that ongoing reports of weak trading conditions on the high street will spell bad news for the duo in the run-up to Christmas. On HMV, CSFB said it was disappointed to see the Office of Fair Trading refer the company's offer for Ottakar's to the Competition Commission, delaying the potential for an earnings-enhancing deal. On Smiths, the broker applauded the reforms enacted by Kate Swann's regime but warned that the company is not immune from weak trading conditions in the sector.

Rentokil Initial lost 3.75p to 162.75p as Morgan Stanley placed 14 million shares at 163.5p on behalf of a client. Meanwhile, profit-taking left Marks & Spencer 7.5p lower at 478p. Legal & General lost 1.5p to 118.5p on the back of a downgrade at JP Morgan. Cutting its rating to "underweight" from "neutral", the broker argued that L&G is among the most exposed to the trend of improving life expectancy in the UK. Investors were particularly unsettled by the 100p price target the US broker slapped on the insurer.

Venture Production jumped 28.5p to 508.5p as investors welcomed the oil explorer's operational update. Venture boasted that it had produced 50,000 barrels of oil from its site in the North Sea which is well ahead of City forecasts.

Hopes that Rank will soon be in a position to announce the sale of its Deluxe film division drove its shares 3.75p higher to 308.5p. It has taken well over a year for the group to negotiate an exit from the ailing business.

Private & Commercial Finance, the motor and business finance company, jumped 4.5p to 19.5p on the back of a bullish trading statement. The company boasted of record month-on-month new business wins.

Finally CRC, unchanged at 129p, saw David Ryan, chairman of the mobile phone repairs group, buy 20,000 shares at 129p apiece.