MARKET REPORT: Takeover speculation puts rocket under Aviva

Aviva became the latest household name to find itself at the centre of takeover rumours.

Shares in the FTSE 100-listed Aviva surged 5.3 per cent, or 20.7p, to 409p after reports suggested that three overseas bidders were thinking about making an offer.

Germany’s Allianz, Intact Financial Corporation of Canada and the Scandinavian group Tryg are among those thought to be interested. At least one was said to be considering a £6 a share bid. Aviva declined to comment.

But that did little to calm speculation in the City.

Rumours: Aviva shares surged after reports suggested that three overseas bidders were thinking about making an offer

‘Is Aviva the next FTSE 100 takeover target? The market certainly seems to think so,’ said Russ Mould, investment director at AJ Bell.

‘Aviva is left as one of many stocks on the UK market looking unloved but still offering the potential for long-term value generation.

‘One of the obvious times to buy a company is when it has made solid progress with a turnaround programme as that de-risks the investment case.

‘Aviva has cast off the shackles of being a conglomerate and sharpened its focus as a result of asset disposals and a new impetus to grow, making it a stronger business. Naturally, that makes it more appealing to a would-be suitor.’

Aviva already won a vote of confidence earlier this week from the City when Jefferies raised its rating to ‘buy’ from ‘hold’ and increased the target price to 480p from 445p.

The insurer’s gains filtered through the blue-chip index, with peers Legal & General up 3.2 per cent, or 6.7p, to 217.1p, Prudential added 1.5 per cent, or 12.4p, to 867.6p, Beazley rose 1.7 per cent, or 9p, to 542p and Phoenix increased by 1.9 per cent, or 8.9p, to 467.1p. The FTSE 100 rose 0.6 per cent, or 43.04 points, to 7494.58 and the FTSE 250 gained 0.8 per cent, or 132.34 points, to 17732.32.

Oil prices steadied further at the end of a turbulent week with a barrel of Brent crude hovering around $84. But the possibility of lower fuel costs proved fruitful for airline stocks.

Easyjet rose 2.5 per cent, or 11p, to 449.3p, IAG added 0.8 per cent, or 1.25p, to 156.35p and Wizz Air increased 0.6 per cent, or 10.5p, to 1930.5p.

Shell also made gains after it flagged improved third quarter trading conditions for its gas business.

Michael Hewson, chief market analyst at CMC Markets, said: ‘With the sharp rise in oil prices seen since June you would expect to see a significant improvement in oil margins over the quarter, however there was little mention of that in today’s production update.’

Shares in the oil giant rose 1.9 per cent, or 49p, to 2581.5p.

Investors in De La Rue took comfort after the bank note printer raised its profit forecast for the six months to the end of September. Shares rose 1.5 per cent, or 0.9p, to 61.4p.

SRT Marine Systems, which provides surveillance to monitor fisheries, sank 6.8 per cent, or 3p, to 41p after it said it was likely to report a loss of £4.5m for the six months to the end of September.

Nursing even heavier losses was Petra Diamonds as the firm, which mines in South Africa and Tanzania, dropped 9.3 per cent, or 6.2p, to 60.8p following a slump in the sale price of its precious stones.

Spirent Communications sank into the red in what can only be described as a dismal week.

The FTSE 250 firm, which tests 5G mobile and Wi-Fi networks, plunged 31 per cent on Wednesday after it issued a profit warning and said the telecommunications market is ‘extremely challenged at this time’ with its largest customers cutting spending.

Spirent Communications fell a further 2.2 per cent, or 2.1p, to 91.7p yesterday after Deutsche Bank Research reduced its target price to 110p from 200p.