Footsie in the red

BAA shares closed almost 3% higher as the £10 billion battle for the airports operator finally came to the boil today.

The share price increase was driven by a statement from BAA revealing it had begun talks with Ferrovial and an unnamed second party, thought to be Goldman Sachs.

The developments involving BAA proved to be the highlight of a lacklustre session, with the FTSE 100 Index closing just 2.5 points lower at 5762.1. Investors in the second-tier FTSE 250 Index fared less well with a drop of 95.8 points to 9351.9.

Oil prices came to the rescue of the top flight as Royal Dutch Shell and BP both gained on the back of the rising cost of a barrel of crude oil.

Shell was up 21p at 1845p, while BP lifted 2.5p to 636p.

But the pair were beaten to the top of the risers board after BAA made its surprise announcement that it was in dual talks. Analysts took this as a sign that both parties had sweetened their offers ahead of deadlines imposed under Takeover Panel guidelines.

BAA shares were 23p higher at 928p, not far from the 940p a share that the company itself has suggested is a reasonable benchmark for its share price.

Other risers included Norwich Union owner Aviva after Deutsche Bank raised its rating on the stock from hold to buy and said a 15% discount to its peers appeared “unjustified”. The rest of the sector failed to benefit with Prudential down 8.5p at 576.5p and Legal & General off 1.5p at 125.75p.

Vodafone shares gave back some of their recent gains by falling back 1.75p to 125p. Shares in the world’s biggest mobile phone rose sharply last week on the back of results and shareholder buybacks, but signs of further boardroom unrest over the weekend did little for sentiment towards the stock today.

Elsewhere, a sparkling performance from celebrity jewellery Theo Fennell saw its shares soar 33%, or 13p to 52p.

The group reported a record seven-fold increase in pre-tax profits and said it was still in talks with investors over a possible deal for part of the business. It also plans to continue with an aggressive expansion overseas and in the UK.

Chocolate retailer Thorntons saw a rise of 4%, or 5p, to 121p as investors cheered the appointment of John von Spreckelsen as its new executive chairman. Mr von Spreckelsen was a key player in the revival of Somerfield.

Shares in Photo-Me International, a leading maker and operator of passport booths and digital picture kiosks, jumped 23% to 106.5p after it confirmed it was considering a sale of the business.

The biggest Footsie risers were BAA up 23p at 928p, Boots ahead 10p at 736.5p, BHP Billiton up 14p at 1039p and InterContinental Hotels ahead 12p at 941p.

The biggest fallers were PartyGaming down 4.75p at 122.5p, Persimmon off 36p at 1200p, Sage Group down 5.25p at 232p and British Airways off 7.25p at 340.5p.