Market Report: Takeover chatter sends Prudential soaring

Typically for a Friday, the volume of trade in the market was unspectacular. This time around, lots of traders were glued to their television sets watching the last day of the Cheltenham Festival.

Prudential was one bright spot as traders talked of a potential 900p bid, sending the insurer's shares soaring 44.5p to 672p. As the session wore on the more convinced traders became that a deal will be announced this weekend. The bidder is thought to be one of the larger US insurance players, or its UK rival Aviva.

Prudential was helped along by bumper results from Legal & General, which reported a 43 per cent rise in pre-tax profits. L&G shares led the FTSE 100 higher, adding 9p, or 7.1 per cent, to 143.5p, as full-year 2005 numbers came in at £1.1bn, well ahead of consensus forecasts of £938m.

Some analysts were disappointed there was no share buy-back programme included in the results and questioned the sustainability of margins. As one trader said, "there is no pleasing some people".

Traders watched BAE Systems as large premiums were paid on the options markets for the June 460p calls, indicating that some people think the stock will get beyond that price within the next three months. Some were sceptical about the prospects for a bid because of the nature of BAE's business, and because the company is worth about £15.6bn including debt. Nonetheless, its shares closed up 9.25p at 423.75p.

After five years the FTSE 100 finally regained the 6,000 level, driven by strong corporate profitability and continued bid speculation. A spectacular start for the London markets, with the triple-witching option and future expiry adding some extra spice to morning trade, saw the 6.8 movement required hit within minutes of the market opening. By 10.40am the market had hit 6,044, a rise of 50.8 from Thursday's close, but interest waned in the afternoon, and profit-taking saw the market lose much of its early lustre. The index was unable to hang on to the 6,000 level, and closed 6.2 higher at 5999.4.

Hanson, the building materials groups, lost some ground after recent speculation over a break-up or takeover failed to materialise. Losses were slight, its shares closing 13p lower at 750p, partly because most traders are reluctant to close a position before the weekend.

News that Ferrovial has finally put together the finance to bid 810p a share for the airports operator BAA was greeted with deafening silence from traders, most of whom had hoped for at least 900p. Shares in BAA declined by 10.5p, but clearly the market believes there are more air miles left in this takeover battle as its shares closed at 828.5p, 18.5p higher than the Ferrovial offer.

After a day of stellar performance on Thursday, it was not surprising to see some house builders give back some of the gains. Persimmon, having led the way up, gave back 14p at 1,379p, as directors sold 308,761 shares in the group. The sales took place to cover capital gains tax liabilities from stock options. The chief executive, John White, sold 162,730 shares at 1,384p, worth more than £2.2m, to cover his tax bill.

The Body Shop led second-line risers after L'Oréal agreed to pay £652.3m for the ethical beauty products retailer, a widely anticipated takeover. The founders of the UK group, Gordon and Anita Roddick, will make £130m from the sale, which values the 2,085-strong chain at 300p a share. The Body Shop closed up 28p, or 10.4 per cent, at 296p.

The mobile antennae and door seals makerLaird Group announced strong results, an acquisition and a rights issue on Thursday, and UBS urged its clients to buy the stock on the back of the announcement. In a note to clients, the Swiss bank said: "We consider the acquisition of RecepTec a good fit and an attractive price, while the rights issue will in our view enable the group's steady programme of acquisitions to continue."

UBS upped its price target on Laird to 580p. Its shares showed an 18p decline to 446p, but in fact gained 8.5p when Thursday's closing price is adjusted for the rights.

Among small caps, Advent Air, an Australian regional airline that mainly caters for the mining industry, advanced 2p to 9.5p after it reported a 12 per cent increase in passenger numbers during February. Porvair, the speciality filtration chemicals group was again well bid, as traders speculated that the company would be the subject of a bid, after the industrial giant GE paid a 50 per cent premium for a French rival. Porvair shares rose 10.5p to 167.5p.

Invocas Group enjoyed a strong debut on AIM. The group provides debt solutions in Scotland, trading under the name Protected Trustees, and raised £9.5m through a placing at 111p organised by broker Charles Stanley. Invocas shares closed at 147p, a 32.4 per cent premium.