FTSE in positive territory

Retail stocks soared today after three buy-out groups confirmed their interest in an offer for supermarket chain Sainsbury’s.

The potential return of merger and acquisition activity gave the London market a boost, with the FTSE 100 Index 28.7 points higher at 6310.9 by the close.

The rise extended a gain of 79 points on Thursday and confirmed that positive sentiment seen in New York in recent sessions had spread to London. The Footsie is now back within touching distance of the six-year high recorded last month.

Sainsbury’s rose by as much as 18% after a consortium made up of CVC, Kohlberg Kravis Roberts and Blackstone said it was at the early stages of assessing the blue-chip company.

Shares eventually closed 61.75p higher at 507p, a gain of 14%, although analysts said an offer of 600p or more would be needed to take out the company. Shares are already at an eight-year high.

The news ignited the rest of the retail sector, with Morrisons 16.75p higher at 300.75p, Marks & Spencer up 28.5p at 717.5p, Tesco 15.5p stronger at 435p and B&Q owner Kingfisher up 8.5p at 252.5p.

There was also a knock-on effect for pub stocks, as analysts said the likely interest of the private equity bidders in the freehold property estate of Sainsbury’s was likely to be mirrored in the leisure sector.

Enterprise Inns rose 18p to 665.5p in the top flight, while Greene King was up 39p at 1124p and Marston’s lifted 13.75p to 443.75p. Mitchells & Butlers gained 31p to 736p while Punch Taverns added 42p to 1211p.

The other major corporate news came from British Airways, which said the threat of industrial action by cabin crew this week was likely to cost the group around £80 million. Its shares recovered from a weak start, helped by signs of strong demand for premium seats, to stand 8.5p higher at 554p.

The group also posted a fall in profits for the three months to December 31 to £113m (€180m) compared with £166m (€250m) in 2005.

There was also a sharp gain for Imperial Tobacco, which rose 83p to 2175p, amid continued takeover speculation.

And stocks due to report results next week also made progress with GlaxoSmithKline ahead 34p at 1420p and Rolls-Royce 11.5p stronger at 482.5p.

In the second tier, housebuilder Bellway soared more than 4% after it announced it was on track to hit record interim profits and said it remained upbeat for the rest of the year despite recent rate hikes. Its shares were 55p higher at 1480p, while other housebuilders to benefit included Bovis Homes after a gain of 16p to 1067p.

The biggest Footsie risers were Sainsbury’s up 61.75p at 507p, Morrisons ahead 16.75p at 300.75p, Marks & Spencer up 28.5p at 717.5p and Imperial Tobacco ahead 83p at 2175p.

The biggest fallers were Rio Tinto down 59p at 2691p, Xstrata off 50p at 2380p, Royal Dutch Shell down 32p at 1707p and Sage off 5p at 272p.