Increased chance of break-up bid makes Smiths the star turn

Smiths Group was the best-performing blue chip today as investors bet that the chances of the technology group receiving a break-up bid have increased.

The company, which makes airport security scanners, revealed after the market closed on Friday that it had spurned a £2.45 billion bid approach from private equity firm Apax for its medical services arm.

Credit Suisse reckons that this leaves its shares looking cheap: "We originally valued the medical business at £2.1 billion in our sum of the parts.

"We believe the rejection of the bid strongly suggest Smiths management are confident in achieving a higher value for the business and therefore... increase our target price for the group to 1430p per share."

Smiths has long been whispered as a likely break-up candidate, and news that its medical devices arm was of interest cheered investors. Its shares rocketed 140p to 1422p.

It was a good day for having "Smith" in your name, with artificial hip maker Smith & Nephew claiming second place on the benchmark as bid talk resurfaced.

Johnson & Johnson is said to be mulling a fresh takeover approach worth at least 800p a pop. S&N's shares gained 25½p to 710½p.

Shares in London were little changed in subdued trading because markets in the US were closed for Martin Luther King Day.

"There isn't much out there to get traders excited this morning," admitted Manoj Ladwa of ETX Capital. "A holiday in the US usually means we take our foot off the pedal here.

"While on-going bid speculation for Smith & Nephew is attracting some interest, most are using their time to get their tax returns in before the deadline."

The FTSE 100 index dipped 3.67 points to 5998.4.

The miners were a drag on the benchmark amid concerns that China may tighten its monetary policy to curb inflation.

Fresnillo wore the Footsie dunce's hat, retreating 44p to 1448p, while Xstrata was off 28p to 1467p and Rio Tinto shed 60p to 4376p.

Lloyds Banking Group dropped 1.6p to 68p as banking analyst Ian Gordon warned it faces "an extremely challenging 2011".

He lowered his rating from "outperform" to "neutral".

Burberry, the fashion house which made the aviator jacket this winter's lust-after garment, was in vogue ahead of tomorrow's trading update.

It is tipped to post an almost 20% jump in sales as foreign shoppers, especially the Chinese, continued to lap up chief creative director Christopher Bailey's designs. Burberry's shares ticked up 17p to 1072p.

Taylor Wimpey also moved higher ahead of a trading update and as figures from Rightmove showed that asking prices were up 0.3% in the month to mid-January.

Investors have been cheered recently too by talk that the housebuilder may sell its US arm. Its shares jumped 2.1p to 36p, making it the mid-tier's star performer.

Betfair rose 46p to 968½p. Bosses at the online betting exchange staged a City roadshow last week to persuade the Doubting Thomases of the business's prospects.

It came after Betfair's shares fell far below October's float price of £13.