Buy-out talk makes Kelda a top London gainer - 18 May

Kelda , the owner of Yorkshire Water, was among the top performers as the FTSE 100 surged to a six and half year high.

Shares in the utility company climbed 3.2 per cent to 976½p amid talk that it could be a leveraged buy-out target.

Analysts believe there will be one more deal in the sector before the next regulatory review and they see Kelda, with its conservative balance sheet, as vulnerable

In a recent research note, Merrill Lynch said the perfect time for a predator to strike would be when Kelda completes its £750m capital return next month.

In the wider market, the FTSE 100 advanced 61.6 points, or 0.9 per cent, to 6,640.9 – its highest finish since September 7 2000. Over the week, the blue-chip index added 75.2 points, or 1.1 per cent.

The heavyweight oil sector provided the backbone for Friday’s advance. Royal Dutch Shell added 2.5 per cent to £19.06, taking its gains over the past two sessions to 6.2 per cent, as rumours of a merger with BP, up 2 per cent to 582p, continued to swirl the market.

“A common argument against consolidation is that the previous mega-mergers happened in 1998-99 when oil prices were low. However, the game has changed, in our view,” said Man Securities.

“Rising costs, resource nationalism and increased competition are changing the industry landscape.”

Elsewhere in the sector, BG rose 1.3 per cent to 780p amid suggestions of predatory interest from Exxon Mobil

Traders said oil stocks had also benefited from sector rotation.

Indeed, it was a powerful performance from second-line oil exploration stocks that helped the FTSE 250 end 59.2 points, or 0.5 per cent, higher at 12,202.8.