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Private equity orbits Inmarsat

IC BIDWATCH: Satellite operator sees stakebuilding, plus Melrose's latest offer for FKI and more in property, insurance and mining

Inmarsat's shares got excited with bid rumours before a dampened things down again. US hedge fund Harbinger Capital holds a 28 per cent stake in the satellite operator; takeover rules mean it would need to make a formal offer if it increased its holding much further. Lehman Brothers (or one of its clients) also increased their stake this week to 12 per cent, but the same institution then led Thursday's share price dive by downgrading to hold.

Harbinger owns stakes in other satellite operators, suggesting it may try to roll up the sector. But Inmarsat chief executive Andrew Sukawaty doesn’t sound unduly concerned. "We've had a couple of big investors jumping in heavily in the last six to eight months," he says. "We’re still a new company, and different investors take different views." Harbinger isn't expected to act imminently, but analysts at Dresdner Kleinwort say this could be one to watch. "We note that there are now several block holdings of stock," they said in a note. "This will continue to drive M&A speculation."

Analysts at Landsbanki have been less encouraging towards . Andrew Carter advises clients to consider reducing their FKI holdings, as the 82p-per-share bid values FKI at just 7.5 times calendarised 2008 earnings forecasts - a "massive discount" to the UK capital goods average of 11.5 times. FKI's board has committed to breaking up the engineering group, whose revolving credit facility is close to expiry. But Mr Carter - who makes a sum-of-the-parts valuation of 130p - says it is unlikely to agree such a low price, while Melrose would likely have to raise funds for its cash-and-shares deal at a "significant discount" to its current share price. A private equity bid might be FKI's best hope.

Other sectors with brewing bid rumours include property, insurance and mining. Liberty International was the focus of bid chatter, with potential interest from sovereign wealth funds, but Hammerson, British Land and Great Portland Estates all gained ground. In mining, Xstrata's ongoing bid talks with Brazil's Vale haven't halted ongoing chatter about tie-ups with Lonmin or Anglo American. Meanwhile, Prudential and Aviva gained on rumours from China that insurance group Ping An is raising funds for UK acquisitions.