Market report: Monday close

By SARAH MARKS FOR MAILONLINE
Updated:

 

Buyers were coming for Financial Times publisher Pearson today as a whisper went round the City that French private-equity players were stalking Les Echos, its newspaper division there.

Business newspaper Les Echos has a circulation of just 120,000 but is nonetheless one of France's only profitable daily publications.

However it is a tiny contributor to Pearson's overall profits, responsible for about £2m in earnings before interest, taxes, depreciation and amortisation on sales of £55m last year.

Dresdner Kleinwort analyst Usman Ghazi said the rumours seemed highly credible, and noted a resurgence of venture capitalists' interest in newspaper assets in France. But while Les Echos may seem peripheral to Pearson's profits and business profile, he doubted if chief executive Marjorie Scardino would want to sell.

'The FT is a global brand with common advertising,' Ghazi said. 'Sell it and they lose access to the French market.'

Worries about the sinking dollar outweighed bid talk and Pearson, which derives much of its profits from its US education division, fell 10p to 761p. The same concerns dragged down dozens of heavyweight stocks and the FTSE 100 was off 72 points at 6050.1. About 50% of earnings in the mining and pharmaceutical sectors are dollar-based.

In the US, the Dow Jones opened down 102.20 points at 12,178.00. Elsewhere-in the UK media sector, United Business Media climbed 13p to 710p on rumours that venture capitalist Apax Partners was formulating a bid for its online news division PR Newswire.

Panmure Gordon says the suggested price of £500m looks very low; its own sum-of-the-parts calculation is £620m. UBM could use the money to fund a share buyback or a special dividend of about £2 a share.

 

• Read our analysts' latest small-cap scare tips here.

 

Meanwhile Trinity Mirror found itself on the rise in response to stories that private-equity buyers were lining up. UBS said the talk did little to counter the impression that interest in the company's assets is waning. The UBS analysts said: 'We do not believe the value of bids for all of Trinity would be near the current share price.' Investors disagreed, however, and the stock rose 8p to 500p.

BAE Systems slipped 12½p to 391p as fears mounted over its Eurofighter deal with Saudi Arabia. Rumours say the Saudis are on the verge of tearing up a £76bn agreement with Britain for the Typhoon aircraft if the Serious Fraud Office does not call off plans to access Swiss bank accounts allegedly linked to the Saudi royal family.

Soothing words from stockbrokers failed to alleviate investors' fears. JPMorgan reckoned there was a 75% chance the SFO inquiry into the Al-Yamamah-related payments would end 'without embarrassment and cancellation of the contract'. Merrill Lynch pointed out the investigation has been going on for three years, and the Saudis had agreed the deal last December. If it were cancelled, Merrill says it would knock 65p off the shares.

The fragmented housebuilding sector saw frenzied activity after mid-market player Wilson Bowden said it was being targeted by numerous bidders. Wilson shares shot up 267p to 2098p but investors were betting on more consolidation.

Just about every mid-cap housebuilder notched up significant gains, led by Berkeley, whose shares were 24p ahead at 1635p. Redrow was up 12½p at 636½p, followed closely by Bellway, 11p better at 1370p.

Cairn Energy, off 14p at 1939p, set the flotation price for its Indian business in Mumbai at between 160 and 190 rupees a share, well within expectations. One analyst pointed out that the pre-flotation acquisition by Petronas of a 10% stake in Cairn India at 176.48 rupees did not reflect strong institutional demand for the shares and was a long way from being a ringing endorsement of the float.

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