Market report: Tuesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

THIS week's refloat of RHM has turned into a delightful bunfight among City investors, who have valued it at some £1bn.

Market report

Shares in the Hovis, Mother's Pride and Bisto gravy food group have been priced at 275p, with the entire issue more than six times oversubscribed.

The start of trading on a when issued basis saw institutional investors continue to gorge themselves as the price opened at 290p before touching a peak of 300p. It later settled at 292½p with more than 100m shares traded. Private investors must wait until Friday before they can join in.

Chief executive Ian McMahon was cock-a-hoop about the reception given by investors. 'We are determined to create value for our shareholders,' he said.

RHM is one of the biggest food producers in the UK, with annual sales topping £1.53bn. Customers include supermarkets giants Tesco, Asda and Waitrose. It was bought by private-equity outfit Doughty Hanson from Tomkins a few years ago.

Investors generally pinned their hopes on an opening rally on Wall Street this afternoon. The Dow was soon 50 points higher, but at the close, London's FTSE 100 index was down 6.1 at 5208.1.

The London Stock Exchange's regular after-hours auction is to be extended by a further five minutes tonight to enable institutional investors to rebalance their portfolios ahead of tomorrow's merger of Royal Dutch and Shell. The tie-up, which will make Shell considerably bigger than its current £52bn price tag, will also result in a re-weighting today of the Footsie.

Shell, 9p lower at 528p, BP,6p higher at 629p, and BG, 1¾p firmer at 456¼p, between them now make up about 21% of the total value of the companies quoted in the lead indicator. The enlarged Royal Dutch Shell fell slightly to 1824½p on a when-issued basis.

Scottish Power stood out among utilities with a rise of 8¾p to 504p, reflecting heavy traded options activity. Brokers say the sale of its US business Pacificorp makes it a sitting duck for the likes of Germany's RWE or France's EDF.

Discount retailer Matalan led second-liners higher, up 14p to 205p, as bid hopes were given another airing. Once again talk focuses on a takeover by Asda, part of giant US retailer Wal-Mart. But any offer will have to be agreed. Chairman and founder John Hargreaves owns 52% of the shares.

Support services group Premier Farnell fell 5p to 164¾p after broker Dresdner Kleinwort Wasserstein sold a parcel of 4.5m shares at 164p to various institutional investors.

It was the last day of trading for online travel agent Lastminute, up 1½p at 165½p, which has been successfully bid for by Travelocity Europe in a deal valuing the former at £577m.

Plumbing supplies distributor Wolseley continued to lose ground, falling 15p to 1159p in the wake of yesterday's disappointing trading update. But US broker Smith Barney has repeated its buy rating and raised its target from 1240p to 1300p.

Mobile phones operator O2, which has quarterly subscriber details out tomorrow, rose ¼p to 136½p after securing a £390m, three-year deal to sell its Airwave radio system to the ambulance service in England. Airwave has already been enlisted by Britain's police forces and is on the shortlist for a national Fire Service contract.

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