Gallaher speculation sparks FTSE performance

Cigarette makers offered a spark to the London’s leading shares today amid speculation over a takeover battle for Benson & Hedges owner Gallaher.

Shares in the company soared almost 19% after it said last night it was the subject of bid interest, even though a possible suitor was not named.

Gallaher, which is also behind the Silk Cut brand, topped the leaderboard as the FTSE 100 Index rose by 20.5 points to 6110.8 by mid-morning.

Imperial Tobacco and British American Tobacco – the market’s other listed tobacco companies – were up 6% and 3% respectively as investors eyed the prospect of further consolidation in the sector.

But there was no catching Gallaher which was stronger by 183.5p at 1162.5p.

Leisure group Rank floundered after announcing the $965m (€726m) sale of its Hard Rock Café chain to a Native American tribe. Shares slipped almost 4% – or 9.75p – to 256.75p amid disappointment over the sale price, which was coupled with a downbeat trading statement.

Back in the top flight, the market received a helping hand from banking stocks with Barclays ahead almost 4% – or 24p – at 710.5p as rumours circulated over a potential takeover.

Royal Bank of Scotland was up 31p at 1947p and Lloyds TSB cheered 8p to 551.5p.

Meanwhile, Bradford & Bingley regained ground after an early slump to stand 8.75p stronger – almost 2% – at 486.75p following news it expected full-year profits to meet expectations.

But it was not such a positive morning for Severn Trent which suffered a knock to half-year profits as it counted the cost of tackling leaking pipes and refunding inflated bills. Investors reacted to the news by sending the stock down 27p to 1452p.

Elsewhere, First Choice Holidays took off by almost 4% – or 10p – to 274p after emerging from a difficult year to report a boost in profits. The firm, which is trying to offload its package holiday arm, said increased long-haul bookings had helped offset a slow summer in Europe.