Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

NO-FRILLS airline easyJet has paused for breath following the news that Icelandair had increased its stake to 10.1% with the purchase of an extra 6.73m shares.

Shares of easyJet soared 16% off recent lows on Friday, fuelled by the news that Icelandair had bought an initial 8.1% stake through broker Teather & Greenwood, prompting speculation that it may be the prelude to a full bid.

But Icelandair chairman Hannes Smarason would not be drawn, describing the move as a 'long-term trade investment'. It is easy to see why.

Increased competition and rising fuel costs have cast a shadow over prospects for the discount airline operators. Margins are under pressure and profits have begun to suffer. The fast growth that they have enjoyed during the past few years has stalled.

That has been reflected in the easyJet share price which has slumped from a peak of 380p since the start of the year and today was trading at 157 3/4p, down 1p.

If Icelandair does decide to make an offer, it will have to reach agreement with founder and former chairman Stelios Haji-Ioannou, who continues to hold 41% of the shares.

Buoyed by the overnight strength of the Dow on Wall Street and softer oil prices, share prices in London were marked higher. The FTSE 100 closed 46.7 points higher at 4630.1.

Leading blue-chips higher was Shire Pharmaceuticals with a jump of 4 1/4p to 526p after receiving the go-ahead from the US Food and Drug Administration for its kidney treatment Fosrenol. The drug will be used to reduce the phosphate levels in more than 1m kidney dialysis patients worldwide.

Water supplier AWG, the old Anglian Water, climbed 11 1/2p to 731 1/2p despite broker UBS downgrading the shares from buy to neutral while retaining its 12-month target price of 755p. This followed news that smaller rival South Staffordshire Water, up 130p to 1095p, had agreed acquisition terms of 1120p a share from AquaInvest, part of the Islamic Investment Bank.

That spilled over into the other water companies, some of which are also seen as potential takeover targets. Bristol Water jumped 25p to 515p, Pennon 40p to 929p 1/2, United Utilities 7 1/2p to 574 1/2p, and Severn Trent 19p to 920 1/2p.

Legal & General closed unchanged at 100p as another large line of stock went through on the ticker. This time it was 30 million shares at 100 1/4p. Heavy turnover was also recorded in music publisher EMI, 1 1/4p better at 211 1/2p. A line of 5m came on offer at 213 1/2p and were sold on at a smidgen under 214p.

Convenience food supplier and takeover target Uniq closed 4p higher at 197 1/2p after it emerged that private equity outfit Duke Street Capital had built up a stake of 3.58m shares, or 3.1%. Only yesterday, Uniq said it had received an 'enhanced bid approach' having last week rejected two potential takeover attempts.

Magazine publisher Emap firmed 10 1/2p to 785 1/2p. Broker Cazenove has raised its recommendation from inline to outperform ahead of interim results and says the shares are at a discount to their sum-of-the-parts.

Maiden interim results from Aim-listed Blueheath produced few surprises and left the shares unchanged on 145 1/2p. The grocery wholesale supplier reduced operating losses to £2.27m, down from £3.37m.

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