Redrow Stakebuilding Puts Housebuilders On Bid Alert

The housebuilding sector was set alight after the activist Toscafund, run by the former banking analyst Martin Hughes, revealed that it had raised its stake in Redrow from 9.7 per cent to 16.6 per cent, triggering hopes of a bid and consolidation in the sector.

Redrow, Bellway and Barratt Development all soared by more than 9 per cent, with Redrow gaining as much as 10 per cent. In the FTSE 100 Persimmon was up nearly 7 per cent at 788.5p.

The moves came as mortgage data showed that the number of loans to first-time buyers rose very slightly in February but the overall picture was still gloomy. Redrow has been seen as a potential target for Bovis or Bellway. The Toscafund bought into Prudential last year sparking hopes of a breakup, although this never occured.

Instow, the fund controlled by Delta Three and backed by the State of Qatar, reduced its shareholding in Bellway from 3.2 per cent to 2.8 per cent yesterday.

Moves by European central banks to inject extra cash into the banking system today helped to lift stocks in the sector, with HBOS up 4 per cent at 565p and Barclays up 4 per cent at 462.5p.

Barclays was also helped by Merrill Lynch adding it to its most preferred list, saying the sell-off had gone too far.

Alliance & Leicester, one of the most exposed to wholesale funding, gained 11.5p to 555.5p despite Fitch cutting its credit rating on the mortgage bank by one notch.

The Bank of England promised extra funds to ease soaring interbank lending rates. It offered £13.62 billion at its regular weekly money market operation, more than last week, which was snapped up, and Mervyn King, the Governor of the Bank, told MPs last night that he was discussing longer-term action — taken as a hint that he was looking at buying up mortgage assets.

The European Central Bank and the Swiss National Bank were also lending out extra cash to money markets.

Prudential gained 12p to 655p on rumours of a bid or stakebuilding from China Life. It and Ping An have been cited as potential stakebuilders in the insurer for some time.

First Group, the bus and train operator, was one of the top performers after it defied expectations of a slowdown in demand with a strong trading statement and it gained 5 per cent to 571.5p.

Similarly, Compass, the global caterer, said that trading was ahead of its expectations and it rose 4 per cent to 323p.

The soaring price of oil, after an important pipeline in Iraq was destroyed by a bomb, helped Cairn Energy, the Indian oil group,to rise 3.7 per cent to £27.84, while Tullow was up 2 per cent at 670.5p.

Wolseley, the hard-pressed builders merchant, rose 2.5 per cent to 540p after Goldman Sachs upgraded to neutral from sell.

Kingfisher was the worst performer after it slashed its dividend to conserve cash. It lost 1.6 per cent to 132.9p.

Rentokil Initial was one of the top peformers in the FTSE 250, up 11 per cent at 97p, after Merrill Lynch raised its target price to 120p and said that the new management team should help to restore value, not with a break-up but by reallocating resources to more profitable areas.

Tag Cloud

External Information

Additional Information

Where Am I?