Market Report: Speculators bet on Formal approach for Homestyle

As more information slowly leaks out into the market about one of Homestyle's biggest shareholders, bulls of the stock became more convinced that a bid for the company is imminent.

As more information slowly leaks out into the market about one of Homestyle's biggest shareholders, bulls of the stock became more convinced that a bid for the company is imminent. Shares in the soft furnishings retailer jumped 4.5p to 111.5p yesterday after the stockbroker Seymour Pierce revealed that Formal Property Management Services, which controls 5.1 per cent of Homestyle, has a history of spotting companies on the cusp of being taken over.

According to Seymour Pierce, the Jersey-based group last year built up a sizeable stake in Freedom Furniture, the Australian furniture retailer, shortly before it was acquired. Could something similar be on the cards at Homestyle? Takeover speculation has circled the retailer since May's disposal of its home textiles division Rosebys and has intensified since Michael Rosenblatt, Homestyle's long-standing chief executive, stepped down from the board last month.

Prior to the Rosebys sale there were some worries about the retailer's future but this now looks secure after it raised £50m from the disposal. That does not mean that trading is booming at Homestyle. In fact, Seymour Pierce warned that trading was tough at the company, particularly at its Harveys division. Nevertheless, the broker told investors not to be short of Homestyle stock given the presence of Formal Property on its shareholder list.

Elsewhere, bid talk was back again at Singer & Friedlander, up 10p to 242p, after Burdaras, an Icelandic investment company, declared a 3.4 per cent holding. Burdaras is believed to be separate from Kaupthing Bunadarbanki, which is S&F's biggest shareholding with a 20 per cent stake. Not so long ago Kaupthing was tipped as a potential buyer of S&F and such a scenario could soon be on the cards again.

As it stands, Kaupthing is barred from bidding for the group by Takeover Panel rules. But this restriction is due to expire by the end of the month. The Icelandic bank has maintained that its interest in S&F is merely that of an investor and one that intends to be "supportive" of the current management. This could, of course, change.

Somerfield improved 4p to 150p as it emerged that the entrepreneur Jack Petchey had taken a 3.1 per cent holding in the supermarket group via his Trefick investment vehicle. Moss Bros added 2p to 90p after issuing a bullish trading update. Philip Mountford, its chief executive, picked up 21,500 shares at 91p after the statement. Ben Bailey rose 3.5p to 412.5p on the back of interims from the house builder, which boasted a 29 per cent jump in profits to £7.5m.

The FTSE 100 rose 14.0 points to 4,429.7.Royal & SunAlliance gained 1.25p to 77p as JP Morgan applauded the price the insurer managed to secure for its life business by upgrading its recommendation on RSA from "neutral" to "overweight" and setting a 90p price target on the stock. Last week the group announced the £850m disposal of its life business.

Stanley Leisure ended 3.5p higher at 426.25p despite news that a number of directors had cashed in some of their share options. Leading the way was Robert Wiper, the chief executive, who sold 65,000 shares at 423p after exercising an option over 80,500 shares. Meanwhile, Michael Riddy, the finance director, sold 36,000 shares at the same price after exercising an option over 86,000 shares.

Quantica, the recruitment group, ticked 0.5p higher to 57.5p after forecast-beating first-half figures. Pre-tax profits came in at £1m compared with analyst forecasts of £900,000. By the year-end, profits at the group are tipped to top £2.4m. Quantica shares have become increasingly liquid after early-stage investors, accounting for 40 per cent of the company, sold their holding in the market. Over the next few days, the recruiter is due to go on a roadshow of institutional investors in the Square Mile and Edinburgh. Hardman Resources rose 1.75p to an all-time high of 93.5p after Fidelity, the fund management giant, raised its stake in the oil explorer to 6.1 per cent.

Jarvis Porter ticked 1.25p higher to 13.5p as Peter Gyllenhammar raised his stake in the company to 29.8 per cent. The Swedish value investor disclosed the purchase of 1.5 million shares, taking his total holding to 14.3 million. Jarvis shares took a pasting last week after it issued a profits warning. Computer Software put on 4p to 59.5p after the group, chaired by Michael Jackson, the famous technology sector venture capitalist, unveiled a narrowing of full-year losses and a positive outlook statement.

Highbury House Communications was steady at 14p despite rumours that Ian Fletcher, who retired as the publisher's chairman and chief executive at the start of the week, is looking to sell his 5.6 per cent stake in the company. Brokers fear he may struggle to execute such a move. Highbury shares now trade near all-time lows after a profits warning.