The takeover approach on J Sainsbury pushed grocers, pubs operators and hoteliers sharply higher as any company boasting freehold property portfolio became a possible bid target.

That made Imperial Tobacco odd man out on the FTSE leaderboard. Shares in the group, whose brands include Lambert & Butler and Rizla, hit a record high as JPMorgan predicted that Japan Tobacco’s bid for Gallaher last year would mark the start, rather than the end, of sector dealmaking.

“Imperial Tobacco is an attractive potential consolidation target,” the broker told clients. It noted comments in the week from Altria, the owner of Philip Morris, suggesting that it could do a large deal even before completing a demerger of its Kraft foods unit, planned for March.

With Philip Morris essentially debt-free, it has firepower in excess of $30 billion (£15 billion), the analyst Michael Smith argued. On yesterday’s prices, Imperial was valued at about £14.2 billion.

Similar theories had been in circulation even before Japan Tobacco revealed its move for Gallaher in December, but such talk usually stalls on the antitrust implications. However, JPMorgan argued that either Altria or British American Tobacco could placate competition authorities by recruiting a junior partner for a bid. Given the aquisision strategy of most companies, this would not be a significant challenge, Mr Smith said.

Imperial finished the day up 83p at £21.75 — a price that Dresdner Kleinwort’s team said had already discounted a bid taking place, which may force the Takeover Panel to ask some questions. “There must now be downside risk if a transaction does not materialise soon,” they argued.

In the wider market, the FTSE 100 pushed up 28.7 points to 6310.9. Sainsbury led the way, up 61¾p to 507p, after private equity groups confirmed that they were investigating a leveraged buyout of the supermarket.

“We suspect that investors will now adopt a different valuation approach to this sector — even to Tesco,” Andrew Fowler said in a note moving the UK’s No 1 grocer on to Merrill Lynch’s “buy” list.

“That it has taken the combined efforts of three buyout funds even to assess Sainsbury suggests a bid for Tesco is improbable, but mathematically at least, Tesco’s interplay of property, profit and loss, cashflow and debt market rating strength may make even it seem a theoretically feasible target,” the analyst told clients.

Tesco rose 15½p to 435p, while similar logic lifted Morrison Supermarkets by 16¾p to 300¾p and helped Marks & Spencer to add 28½p to 28½p. Whitbread, the hotel and leisure group thought to be further along with plans to split property into a Reit, added 45p to £16.87. SABMiller missed out, fading 16p to £11.60 as Bernstein Research predicted that growth at Baltika, its Russian joint venture, would slow if Moscow reintroduces controls to limit alcohol consumption.

This week’s record earnings from Shell, down 32p to £17.07, were not enough to please the analysts, with Dresdner Klein-wort and JPMorgan cutting ratings to “neutral”.

A broker downgrade dented Sage Group, off 5p to 272p after Merrill Lynch moved to “neutral” on valuation grounds.

Investors may also have been switching to other software vendors after Oracle’s president said that the American group was planning aquisitions — a comment that excited business intelligence specialists, such as its American peer Hyperion Solutions and Business Objects, of France. Autonomy, which makes information sorting software, climbed 40p to 646p in the slipstream.

Traders noted busy two-way trade in EMI, off ¼p to 249¼p. There have been rumblings that last month’s profit warning has encouraged potential predators to take another look.

New York: US stocks reversed opening gains after the latest monthly jobs report showed steady growth in hiring and modest wage gains. By mid-morning. the Dow Jones industrial average was down 3.44 points at 12,670.24.

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