Whitbread gains as break-up talk resurfaces

A retread of long-standing break-up speculation helped put Whitbread among the gainers on Monday.

Spinning off Costa Coffee would boost Whitbread's sum-of-the-parts value by 34 per cent, said Goldman Sachs, which saw the group as a potential bid target.

Costa had "little synergy" with Whitbread's Premier Inn chain, which would be "an attractive strategic target for global hotel players looking to expand their footprint", said Goldman.

US peer valuations suggest the two business could be valued at multiples of 29 times and 22 times 2015 earnings, respectively, justifying a £71-a-share price target, the broker said.

Ahead of full-year results next week, Whitbread rose 0.7 per cent to £52.75.

Goldman also argued for a break-up of Smith & Nephew, up 1.9 per cent to £11.58. Shedding its wound management division would increase the strategic appeal of S&N's core orthopaedics business, it told clients.

Miners supported the wider market after China's biggest cut to bank reserve requirement ratios since 2008 helped stabilise metals prices.

The FTSE 100 rose 57.5 points, or 0.8 per cent, to 7,052.13. Rio Tinto added 2.6 per cent to £28.74 awaiting a production report due overnight.

Ashtead rose 2.9 per cent to £11.44 after Barclays named the equipment hire group its top sector pick and said recent weakness was an opportunity to buy.

Barclays also turned positive on Northgate, the van hire specialist, which rose 3.8 per cent to 650.5p.

Tesco drifted 0.7 per cent to 235p amid talk it had put a £2.6bn price on central European operations excluding its Czech Republic stores, and that Walmart was among the interested parties.

InterContinental extended its rally to a record high, up 2.4 per cent to £27.86, on continuing speculation that Starwood Hotels might be pressured by activist investors into seeking a merger.

Starwood was regularly named among the possible bidders in reports a year ago that InterContinental had rejected a £6bn offer, though some investors believe that approach came from Hyatt, its now-smaller peer.

Carnival was down 0.9 per cent to £31.89 after key rival Royal Caribbean Cruises cut the midpoint of its 2015 earnings guidance.

The cruise ship operator blamed softer onboard spending by non-US guests, which was largely a function of the strong dollar.

A day before its quarterly results, AB Foods lost 1.5 per cent to £28.63. Like-for-like sales at AB's Primark retail chain are expected to be flat on last year because of poor weather and some store cannibalisation.

A profit warning sent Petrofac sliding 10 per cent to 912.5p with the oil services group saying staff costs a Total-owned gas project in Shetland would cost an extra $195m.

Petrofac had already made a $230m provision for the project with its 2014 results.

Al Noor Hospitals slipped to a 13-month low, down 1.1 per cent to 890p.

Deutsche Bank confirmed on Friday that it was holding 9.5 per cent of the hospital operator, having failed to sell all of a 20 per cent stake on behalf of Ithmar Capital at a 925p minimum price.

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