Market Report: Intertek rocked as bid stories evaporate

For a second day, market professionals reported turbulent trading in Intertek, the British quality-control specialist. Shares in the group touched a low of 686.5p and a high of 715p during the session, and settled at 710p, up 6p on the day. So why the volatility at Intertek?

On Thursday, bid chatter surrounded the group, which tests goods ranging from textiles and chemicals to toys. Switzerland's Société Générale de Surveillance was said to be interested in buying Intertek and the speculation was enough to cause heavy demand for the shares. Yesterday, dealing rooms were awash with talk that Swiss banks had been gobbling up Intertek stock.

According to the story, a group of investors approached a number of Swiss banks this week and asked the banks to issue them with Intertek warrants. Warrants allow investors to cash in on a rise in a share price with a relatively small outlay of capital. The downside to warrants is that they are valid for only a set time period, after which they become worthless.

The implication of yesterday's tale is that the group of warrant investors are expecting a sudden jump in Intertek's shares some time soon and are looking to cash in on it, while at the same time benefiting from the anonymity clients of Swiss banks traditionally enjoy. Any bank issuing such a warrant would have to hedge their position - hence the reports of Swiss banks vacuuming upIntertek stock.

Cynics, however, dismissed the story as the product of commission-hungry brokers looking to drum up business for themselves during an otherwise quiet day in the City.

The wider FTSE 100 rose 30.6 points to 5,213.4 while the FTSE 250 dropped 34.1 points to 7,500.8.ICI gained 1.25p to 280p as Morgan Stanley tipped shares in the chemicals group as being "too cheap to ignore". The US broker said: "We believe the recent share price weakness represents an excellent entry point for investors." To those who worry about the effect of rising raw materials prices on ICI, Morgan Stanley says it is convinced the group will successfully offset such inflation through cost savings along with some help from the strengthening dollar.

Prudential was not so lucky, falling 5.5p to 463p, after a downgrade from Deutsche Bank. Cutting back its recommendation on Prudential to "hold" from "buy", the broker complained that the insurer's new strategy fails to address many of the uncertainties facing the group.

O2 jumped 4.25p to 164.25p on hopes Deutsche Telekom might team up with Hutchison Whampoa to bid for the UK mobile phone group.

De Vere rose 26p to 590p on reports the hotels group has received two informal takeover approaches from private-equity firms. Rumours of a bid for De Vere have dominated trading of its shares during the past week. The group's management rejected a 415p-a-share offer from Guinness Peat last year on the grounds that it greatly undervalued the group. Given yesterday's closing share price, they were certainly right to do so.

Nevertheless, De Vere remains an attractive prospect to private-equity players because it owns many of the 19 four- and five-star hotels it operates outright. This makes it much easier for financial buyers to raise the debt finance required for an offer. A spokesperson for De Vere, which owns the Cavendish in central London as well as 15 health clubs, refused to comment on the speculation.

Mowlem ticked 2.5p higher to 173p as gossips talked of a 225p-a-share offer for the construction group next week.

Dealers have reported stake building in Mowlem, through contracts for difference, for more than a week. First Choice dropped 5p to 190p as Peter Long, the travel group's chief executive, disclosed the sale of 138,000 shares at 196.5p. Dermot Blastland, a fellow executive at First Choice, sold 11,000 at the same price.

Ark Therapeutics added 3.5p to 99.5p after the biotech said it had asked the European medicines regulator for marketing approval for its brain cancer treatment, Cerepro.Nigel Parker, the company's chief executive, said Cerepro could find itself on the market by the end of next year if all goes well for the product. Ark also impressed investors by unveiling positive trial data for its Vitor drug which combats weight loss in cancer patients.

Finally, FishWorks ticked 0.5p higher to 40.5p after a series of director share purchases. Leading the way was Roy Morris, the chief executive of the restaurant chain, who picked up 25,000 shares at 40.75p. Mitchell Tonks, also an executive at FishWorks, matched Mr Morris's purchase, as did Tony Fisher, the chairman. The restaurant group listed on AIM in June of this year at 33p.