Arbitrage players were sent scurrying for their calculators and computer models yesterday as NTL's near £1bn offer for Virgin Mobile hit the wires. The deal has created a great opportunity to play rises in NTL's Nasdaq-listed stock, in combination with foreign exchange movements, against the value of the offer for the UK mobile phone company.
NTL is offering three options to Virgin Mobile's minority investors, who have 29% of the company. The first, to take the money and run, pays out 372p a share. This has become the de-facto "floor" for the London-listed stock. But at what height the roof is located is where the calculators and models come in.
Options two and three involve taking NTL stock. While the number of shares being offered has been set in stone under the terms of the deal, the actual value that set number of shares puts upon each Virgin Mobile share will fluctuate. If NTL's shares rise, options two and three will value Virgin Mobile at well above the 372p cash offer.
On Monday, for instance, the 0.23245 NTL shares being offered valued each Virgin Mobile share at 389p. Yesterday, as NTL stock continued to rise on the other side of the Atlantic, Virgin Mobile added 4.5p to 391.5p.
Back among the blue chips yesterday, the FTSE 100 closed down 19.6 points at 6004.7 as BP weighed on the market, down 10p at 664.5p, after Goldman Sachs cut its forecasts ahead of the oil major's first-quarter trading update today. GlaxoSmithKline, down 23p at £15.00, was also depressed while HSBC gave up 7.5p to 968p.
PartyGaming, meanwhile, eased 2.25p to 131.75p on talk that the company is poised to bid for Empire Online, up 6p at 152p. But the day's biggest blue chip loser was Tate & Lyle, down 11p at 564.5p, as American consumer pressure group Citizens for Health called for the company's artificial sweetener Splenda - responsible for 20% of Tate & Lyle's profits - to be withdrawn and further tests conducted.
Headed in the other direction, shares in J Sainsbury added 0.5p to 333.5p ahead of today's publication of the latest monthly market statistics from TNS which are expected to show that the supermarket has clawed its way back into second place, overtaking Asda. Severn Trent, meanwhile, gained 71p to £11.97 after the utility group announced plans to demerge its UK waste management business, Biffa.
Away from the blue chips the FTSE 250 dropped 11.3 points to 9892.3 with the small cap index up 7.9 at 3638.9 points. Shares in life insurer Resolution dropped 29p to 654.5p - the biggest loser in the FTSE 250 - as traders took profits after the company, which merged with Britannic last year, announced annual results.
Bellway gained 31p to £12.64 as bid speculation whirled around the housebuilder after its management said the spring selling season had started well, with sales over the last eight weeks up 10%. The news overshadowed half-year results in which pre-tax profits dropped slightly to £88m. The confident outlook statement led Citigroup to point out that the company is one of its preferred stocks. The broker is looking for a stock price of £14.84.
Bid speculation also helped Pennon Group, owner of South West Water, add 31p to £13.54, and the UK's largest retirement home builder, McCarthy & Stone, gain 19.5p to 820p.
Down among the small caps, Havelock Europa added 4.5p to 166p - just off a 12-month high - as the support services group announced a jump in annual profits to £6m from £4m a year ago, its fourth successive year of profit rises. Chairman Malcolm Gourlay said the board believes the business will make further "good progress" in the current year. Havelock's business units stretch from retail interiors and point of sale displays to education furniture and supplies, including installing science laboratories in secondary schools.
MSB International added another 5.5p to 49p. Its shares continue to rise following news last week that it has received a bid approach, understood to be from rival recruitment firm Quantica, down 0.5p at 69.5p.
Down on Aim, shares in Clapham House, the restaurant empire that includes Gourmet Burger Kitchen, The Real Greek and Bombay Bicycle Club, added 4p to 205p as brokers turned positive following last week's 44p a share bid for Urban Dining, the rival firm behind the Tootsies chain. Both KBC Peel Hunt and Numis Securities upped their target prices on the company to 250p.
Zambezi Resources gained 1p to 16p after announcing that it plans to start exploratory drilling at a copper-gold project southeast of Lusaka, Zambia, following the results of a geophysical modelling survey of the region. The tests showed up three potential areas of interest and drilling will start in May.
Shares in Thor Mining added 0.12p to 4p after the tungsten miner made positive noises about production from its project in Australia.
Finally, Delling Group gained 2.75p to 11p after the marketing and communication services company said after the market had closed on Monday that its performance last year was "broadly in line with current market expectations".
Biomedica rally
Shares in Oxford Biomedica have experienced something of a rally over the past two days on hopes that the gene therapy firm will soon have some good news about its most "mature" product, potential cancer treatment TroVax. Last week the company announced that, alongside Cancer Research UK, it will report on results from phase II trials of TroVax in colorectal cancer at the American Society of Clinical Oncology (ASCO) annual meeting starting on June 2 in Atlanta, Georgia. Oxford Biomedica's American clinical collaborators will also be presenting results from clinical trials of TroVax in cancer of the kidney. The presentations will consist of data from five clinical trials of the drug. Oxford Biomedica's shares added 2p to 30.75p - a rise of 7%.