New Year takeover rumours abound

Woolworths' summary rejection of Apax's offer, together with Baugur's offer for Somerfield yesterday, has prompted a rash of retail bid speculation. Numis analyst Iain McDonald noted that JJB Sports, N Brown, Marks & Spencer, Matalan and Sainsbury's have all experienced share price rises in the New Year, while at the same time reporting dull or disappointing trading over Christmas. This indicates that the market sees them as potential acquisitions.

Among the latest takeover targets to be mooted is Mothercare. The retailer's turnaround strategy has been under way for more than a year, but its shares are still cheap, prompting questions over whether it is ripe for acquisition. However, Evolution analyst Nick Bubb warned that the retailer may have trouble ahead. He said: 'The easy part of the turnaround has been done, and a hard grind lies ahead to position the brand against the supermarkets and discount players, so it [Mothercare] doesn't look that attractive a private equity play to us.'

Bubb sees Matalan and French Connection as more likely targets, following the latter's surprise profits warning late last year. French Connection's share price rose sharply this morning by nearly 3 per cent, while Matalan remained level.