Market Report: N Brown rises and then falls on buyout stories

Shares in N Brown went on a roller-coaster ride yesterday as bid rumours continued to swirl around the home shopping group. The story at the beginning of the session was that Lord Alliance, which owns 48 per cent of N Brown, was likely to take the business private and that certainly got punters interested in the stock.

Shares in N Brown went on a roller-coaster ride yesterday as bid rumours continued to swirl around the home shopping group. The story at the beginning of the session was that Lord Alliance, which owns 48 per cent of N Brown, was likely to take the business private and that certainly got punters interested in the stock.

The rumour helped N Brown soar to 140p but it failed to hold on to this level for long as a spokesperson for the company denied the speculation. Shares in the group nevertheless managed to close 5p better at a year-high of 133p and they were helped by an amended version of the takeover story. This tale suggested that a private equity house is running a slide rule over N Brown and that it may soon be ready to make an offer to Lord Alliance and other shareholders.

Back in the summer, Citigroup put forward a convincing case as to why the company might find itself the centre of attention of private equity. The broker argued that there is hidden value in its debtor book. This consists of all the money that is owed to N Brown by customers who have used its various buy now pay later schemes. The value behind this can be unlocked through a securitisation and used by private equity to finance a bid for the company, Citigroup's theory suggested.

Meanwhile, the FTSE 100 had another good day, gaining 46.7 points to 4,630.1, as US indices roared higher. Both the Nasdaq Composite and the Dow Jones Industrial Average went sharply northwards. Man Group was the top performer in London, rising 42 points to 1,319p, on news of a 4.2 per cent jump in the value of the group's flagship AHL fund, which stands at a six-month high. Bulls of Man remain convinced that the hedge fund manager is a bid target and could fetch a price of up to 1,850p a share.

GlaxoSmithKline added 26p to 1,151p ahead of today's third-quarter figures from the drugs giant. As it stands, analysts expect profits for the quarter to fall 12 per cent to £1.49bn. A more moderate drop will be taken well by investors. Prudential improved 5p to 400.75p after Mark Wood, an executive director at the insurer, picked up 25,000 shares at 397.5p each. The DIY retailer Kingfisher was also boosted by director share buying. Its stock rose 3.25p to 305.5p after Sir Francis Mackay, the chairman, bought 12,000 shares at 303.5p each.

Rentokil was not so lucky, losing 2.25p to 154.5p, after Panmure Gordon cut its rating on the support services group to "hold" from "buy". The broker believes that pressure on profit margins at Rentokil is rising and advised investors to switch into Bunzl, 2.5p better at 422p.

Investors scoured the water sector for the next most likely bid target after the management of South Staffordshire Water, up 130p to 1,095p, recommended the takeover of the company by the Bahrain-based First Islamic Investment Bank. Pennon jumped 40p to 929.5p, AWG improved 11.5p to 731.5p, Kelda added 6p to 555p and Severn Trent rose 19p to 920.5p.

Emap jumped 10.5p to 785.5p after Cazenove was heard ushering its top clients into the media group ahead of upcoming interim results. Upgrading its rating to "outperform" from "in line", the heavyweight broker argued that shares in the media group look cheap.

Meanwhile, rumours that Emap will soon swoop on Scottish Radio, up 7.5p to 922.5p, returned. Emap already has a 28 per cent stake in its smaller rival and is said to be putting the finishing touches to an offer to buy the remaining 72 per cent of the Glasgow-based company.

Uniq went 4.5p higher to 197.5p as Duke Street Capital, the private equity firm, declared a 3.1 per cent shareholding in the food company. The bulk of the stake is believed to have been acquired on Tuesday, after Uniq announced that it had received a new takeover approach.

Arbuthnot Securities called time on Wolverhampton & Dudley's strong share price performance over the past year by urging investors to switch into rival Greene King, up 42p to 1,138p. W&D shares have risen by 25 per cent over the past 12 months but dropped 25p to 905p yesterday.

Roxboro ticked 6.5p higher to 382p on talk of strong trading at the electronics group. Word has it business is running well ahead of internal and market expectations. Jarvis was unmoved at 38.5p despite news that the hedge fund JOHCM Alternative Investments had bought another 115,000 shares taking its holding to 7.3 million or 5.1 per cent.

European Colour, steady at 19p, saw the Swedish investor Peter Gyllenhammar raise his stake in the pigments specialist to 8.2 per cent. Tarsus added 4.5p to 106.5p as gossips suggested that business at the exhibitions company is looking better now than it has in years.