MARKET REPORT: Innovation soars on bid approach

By GEOFF FOSTER FOR MAILONLINE
Updated: 17:16 EST, 24 March 2009

Every dog has its day. Insurance software provider Innovation Group soared 3.11p to
7.41p on hefty turnover of 9.2million shares after receiving a bid approach worth £100million, or 15p a share, from private equity firm Carlyle.

Comments made by KBC Peel Hunt's analyst Simon Strong echoed what a lot of investors immediately thought. Given Innovation's recent trading history, major shareholders, led by M&G (9.9 per cent), should jump to accept this potential offer.

Innovation has attracted many colourful speculators over the years including Robert Bonnier, the former dotcom millionaire, who once built a sizeable strategic stake in the company in the hope that one day someone would launch a bid. He has long gone but overall the stock has proved to be a disappointing investment.

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In December, shareholders were flabbergasted when the board rejected a cash bid of between 15p and 20p a share for the company, which was some six times above the prevailing market price. Private equity groups HgCapital and Silver Lake Partners were said to be interested.

Since then chairman Geoff Squire has left the company and KBC's Strong says it is no coincidence that Carlyle's offer has materialised so quickly after his departure.

Carlyle's approach could easily flush out another bidder and a share price north of 15p is possible. Don't hold your breath.

Aggressively sold down to 39.8p on fears it could today cut its dividend - by up to 30 per cent - for the first time in its history, insurer Legal & General closed 2.1p cheaper at 42.8p. Broker ING slashed its target price to 34p from 77p ahead of the full-year figures.

Elsewhere, share prices on both sides of the Pond paused for breath after Monday's excitable reaction to the U.S. Treasury's long-awaited plan to cleanse toxic assets from American banks' balance sheets. The Footsie initially flirted with the magic 4,000 level with a 39-point gain before succumbing to profit-taking. The close was 41.36 points lower at 3,911.46.

After Monday's 497-point or 6.8 per cent surge, Wall Street also met with profit-taking and fell 115 points. Prices rallied though when dealers heard that U.S. home prices fell only 6.3 per cent in January from a year earlier, the smallest decline in five months. 

Rolls-Royce powered 10¾p ahead to 309¼p on talk of a pending bullish circular.
Buying ahead of tomorrow's results lifted fashion retailer Next 41p to 1324p.

Singer Capital Markets says that given anecdotal evidence of relatively strong trading throughout January, pretax profits could come in at the top end of consensus forecasts of between £415million and £435million. It has pencilled in £426million, down 14.1 per cent on last year.

Marks & Spencer, which reports its fourth-quarter sales figures next Tuesday, edged up ½p to 276¾p. Dealers were somewhat perturbed to see the struggling clothing and food retailer yesterday launch a sale offering up to 50 per cent off on selected items.

An M&S spokesman said: 'It's our usual mid-season sale we have every year at the same time in relation to Easter'. But Easter is still two and a half weeks away!

Autonomy rose 31p to 1301p after Panmure Gordon lifted its target price to 1322p from 1265p. The software developer announced that its proprietary IDOL technology now powers the e-discovery platform of Interwoven, the global leader in content management software it acquired recently.

Nervous selling ahead of tomorrow's pre-close trading statement dragged hedge fund giant Man Group 11¾p lower to 201¼p. Evolution has a target price of 400p and believes it has a strong balance sheet and will maintain this year's dividend which equates to an 8 per cent yield on the final payment alone.

Chief executive David Phipps' purchase of 250,000 shares at 41/4p helped Commoditrade firm ¼p to 47/8p.

Welsh semiconductor wafer manufacturer IQE, whose wafers are used to make chips for smartphones, solar cells and LED lighting, soared 2½p to 6p following excellent results.

Better-than-expected full-year results also helped Europe's leading stem cell storage company Cryo-Save climb 4½p to 36½p. Broker Daniel Stewart's target price is 99p.

Motivcom, the employee motivation and incentive specialist, reported impressive annual figures and rose 4p to 22p. AT Communications advanced 2¼p to 14½p after disposing of distribution subsidiary Rocom Ltd for £12.45million.

• Defence roup QinetiQ (up 3¼ p at 139¼p) received a boost from Citigroup, which started coverage of the stock with a 'buy' recommendation and target price of 175p. Analysts at the investment bank noted though that investors are spooked by concerns about the prospect of a £12billion Ministry of Defence training contract collapsing, saying 'the market is now attributing no option value' to the deal.