International Power rises on buyout talk; FTSE wavers

Shares in International Power (IPR.L) climbed on Friday amid speculation that GDF Suez will buy the 30% of the utility it does not already own, while the FTSE 100 wobbled as rising oil prices offset hopes over the eurozone debt crisis.

International Power added 15p, or 4.3%, to 365p as analysts at Espirito Santo Investment Bank noted that the sooner GDF Suez moves for a buyout, the more it will surprise the market, and the less chance of the stock rallying beforehand.

‘We believe speculation will mount on a GDF Suez buyout,’ they wrote. ‘We further believe any takeout would need a 20-30% premium to the current share price. We like IPR on fundamentals alone, but this would be the icing on the cake.’

Noting that ‘the time to buy is now, not later’, the analysts increased their ‘fair value’ for the stock by 11% to 415p.

Euro softens

The UK index of blue-chip shares eased 0.12%, or seven points, to 5,924 and the All Share index weakened 0.11%, or three points, to 3,070. See the FTSE’s performance and the index’s top winners and losers.

Financial stocks dominated the leader board, as investors digested the latest round of European Central Bank (ECB) largesse. Barclays (BARC.L) added 6.9p to 258p and Lloyds (LLOY.L) improved 0.7p to 35.5p.

‘I guess the ECB have demonstrated that you can have quite an impact when you throw a trillion euros at a problem,’ said Gary Jenkins at Swordfish Research. ‘Ok. it’s not that amount of money on a net basis and it doesn’t all flow into government bonds, but you get my drift.’

However, the euro fell versus the dollar for a third day, shedding 0.36% to $1.327, while the yields – or implied interest rates – on Italian and Spanish government bonds edged back up after Thursday’s sharp falls.

But stock markets in Europe edged up: Germany’s DAX index hardened 0.07% to 6,947, France's CAC 40 index added 0.08% to 3,503, and the FTSEurofirst 300 index of top European shares was 0.1% higher at 1,088.

Rentokil drops

On the FTSE 250, Rentokil Initial (RTO.L) slid 2.6p to 77.9p after the cleaning and pest control group reported an expected decline in profits and pointed to continued problems at its City Link parcels business.

‘City Links continues to be a drag on the performance of the business, with fourth-quarter 2011 worse than we had anticipated,’ said Caroline de La Soujeole, analyst at Seymour Pierce.

She added: ‘Management do not expect much improvement in City Link’s performance in the first half of 2012, but expects to see better results in the second half. We are sceptical and do not envisage any marked improvement in City Link for the best part of the year.’