Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated: 12:01 EST, 5 April 2006

NEWS that Icelandic investor FL International was selling its near-17% stake in no-frills airline easyJet has turned the spotlight on other companies in which the Icelanders have taken a stake.

Dealers say the overheating Icelandic economy is the reason for the sell-off, which has forced the free-spending raiders to pull in their horns. FL's own shares have plunged 30% since the Icelandic stock market hit record highs in February. Other Icelandic companies have also suffered and the krona has taken a beating.

Takeover favourite Woolworths was one of those to come under the hammer today, falling ¾p to 34½p. Icelandic raider Baugur has recently built up a stake of 146m shares, or 10% of the retailer and some had predicted it would be used as a springboard to a full bid.

Struggling fashion retailer French Connection, down 7p at 223½p, has also been eyed up by Baugur which, at the last count, owned about 13m shares, or just under 14%, although it had been reducing that. Bryan Bedson's Wyndeham Press marked time at 153¾p. Last month it received an £81m takeover approach from Iceland's Dagsbrun, the media and entertainment group controlled by Thordis Sigurdardottir, which already held almost 20% of the shares.

The parlous state of the Icelandic economy means the raiders now have little scope to pursue their takeover ambitions, and there are fears that a lot of loose stock may be overhanging the market until buyers are found. The raiders have bought up much of the High Street in the past few years, including Hamleys, House of Fraser, Karen Millen and Iceland frozen foods.

Share prices failed to maintain their early pace, but the FTSE 100 index remains above 6000 ahead of expected opening falls on Wall Street this afternoon. Its lead is 39.4 points at 6044.1 although turnover was boosted by tax-year-end trading.

Precious metals group Johnson Matthey responded to a broker's upgrade and helped lead blue-chips higher with a rise of 33p to 1440p. US house Citigroup has raised its rating on the shares from sell to hold and upped its price target from 1350p to 1400p.

Alliance & Leicester, down 53p at 1195p, was among the biggest blue-chip fallers after turning exdividend. US investment bank JPMorgan has repeated its underweight stance on the shares and has also maintained an underweight rating on rival lender Bradford & Bingley, 1¾p stronger at 500¼p. It reckons the ratings of both companies look expensive.

But, JPM has lifted its earnings per share estimates for A&L by 2% to 86.93p for this year and to 88.79p for 2007 to reflect the stronger mortgage market. It has increased B&B's earnings estimates by 5% to 38.05p. Northern Rock, down 19p at 1146p, remains JPM's preferred choice.

Water utility Pennon jumped 35p to 1389p on reports it may soon become a bid target. Word is it has been in talks with Spain's Fomento de Construcciones y Contratas (FCC) since the end of last year about the sale of its waste management division.

The two sides are reckoned to be talking again, with FCC now thinking about bidding for all of Pennon. Deutsche Bank has lifted its price target on Pennon from 1200p to 1340p as it maintained its hold advice.

Soft drinks group Britvic steadied itself rallying 2p to 212p. US broker Morgan Stanley has repeated its overweight rating in the wake of yesterday's disappointing trading update. It insists the shares are cheap and its illiquidity requires the investor to be contrarian.

MS notes that a 25% fall in the shares from its peak on less than a 10% downgrade in estimates presents a good buying opportunity. The shares yield almost 5%.

South China Resources was one of the best performers on AIM, the shares jumping 3p to 17¾p on the signing of a landmark agreement with an institute for geology and mineral resources to develop mining projects throughout the country.

Taking its bow on AIM was marketing services group Twenty, which has transferred across from Ofex following its £10.5m reverse takeover of Dataforce Holdings. The deal was partly financed by a placing of shares at 20p that raised £8.4m. Twenty touched 32½p before settling at 2512p.

Also making it debut on AIM was oil and gas explorer Pantheon Resources following a placing at 100p. The shares started life at 112½p.