Takeover hopes put Reed Elsevier in the spotlight after Deutsche Bank called it the publishing sector’s “most obvious buyout target”.

Deutsche said that a recent private equity takeover of Thomson Learning, its American peer, rewrote the rules on publishing leveraged buyouts (LBO), which previously had been limited to smaller targets with shorter exit paths.

“Recent LBO transactions suggest that prior assumptions about financing limitations and venture capital holding periods no longer apply,” it told clients.

The broker argued that Reed shares could be worth up to 780p to a financial buyer. Sums involved in the Thomson Learning deal also suggested that Reed’s sale of its education business could raise £2.2 billion, up from its previous forecast of £1.8 billion, it said. Reed finished up 16p at 675½p.

In the wider market, the FTSE 100 index finished the day up 36.0 points at 6,606.5. Vodafone was the main influence, gaining 8.3p at 159.7p to reach a five-year high after it accompanied in-line results with its 2008 guidance that raised earnings forecasts by about 4 per cent.

British Airways was among the day’s speculative features, with shares up 21½p to 482½p after Goldman Sachs said that it was suspending research coverage of the airline in compliance with its policy on conflicts of interest.

Goldman’s move was understood to be in response to BA’s decision last week to join a consortium of private equity firms, led by TPG, that was preparing a bid for Iberia, the Spanish airline. The American bank has been advising Iberia on takeover offers since March. Nevertheless, its decision stoked theories that BA itself could become a takeover target for a buyout consortium.

Also in the rumour mill, Alliance & Leicester added 20p to £11.97 on theories of interest from a foreign peer. The bank continued to buy back its own shares, suggesting that it had nothing to disclose.

Meanwhile, Sage took on 3¾p to 248p after SG Securities included the software maker in a note listing Europe’s most likely LBO candidates.

Speculation continued to swirl that BSkyB may sell its 17.9 per cent stake in ITV if required to make the disposal by the competition authorities. However, analysts doubted that any talks would have gone beyond the preliminary planning stage and saw RTL, the most likely buyer, as financially stretched. ITV shares finished the day adrift 1.1p at 118p.

BSkyB — 39.1 per cent owned by News Corporation, the parent company of The Times – was up 20½p to 660½p after UBS published a customer survey suggesting that the broadcaster’s competitive position had been strenghtened by its spat with Virgin Media. UBS told clients: “Our survey strongly suggests that Sky customers do not see Virgin as a credible alternative, while 45 per cent of Virgin customers would rather take Sky if they could. Virgin appears to have underestimated the value of Sky’s basic channels, with our survey indicating up to 400,000 subscribers could switch to Sky.”

GlaxoSmithKline topped the blue-chip loser board, down 28p to £13.06. According to Deutsche Bank, new American prescriptions for its Avandia drug fell close to zero in the days after the publication of a study linking the diabetes treatment with heart attacks.

While the broker’s team conceded that two days of data were not enough to make definitive judgments, it saw the findings as far worse that expected.

Among the mid-caps, IMI was up 13p to 597½p after Citigroup added the valve maker to its “buy” list following a meeting with management last week. Invensys climbed 22¼p to 393p after Goldman Sachs removed its “sell” rating based on hopes that recovery can be sustained at its controls division. New York: Shares eked out modest gains as investors, wary about the forthcoming Federal Reserve minutes, bought cautiously amid takeover deals and upbeat consumer confidence figures. The Dow Jones industrial average closed up 14.00 points at 13,521.30.

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