With shareholders agitating for change, could Vodafone be preparing to cash in on its controversial American venture?

Talk in the market yesterday was that Verizon, the US telecoms operator, may be preparing to buy back some of Vodafone’s 45 per cent stake in their joint venture, Verizon Wireless. That comes after Verizon lodging regulatory papers this week allowing it to raise up to $8 billion (£4.5 bn) of debt, which it said was for general corporate purposes.

Vodafone holds an option to sell $10 billion of Verizon Wireless stock to Verizon, which can be excercised at any time between this week and mid-August at price agreed by both parties, analysts say. Using this so-called put option would not result in the clean exit some investors have been calling for, with Vodafone cutting its stake to around 38 per cent. However, it could pave the way for improved shareholder returns and demonstrate management’s willingness to change strategy.

CIBC World Markets told clients: We believe that it makes sense for Vodafone and Verizon to exercise the option, as it would take off some share-owner pressure on both sides. Vodafone gets increased liquidity and Verizon comes closer to its goal of having complete control of Verizon Wireless." Vodafone moved up 0.9p at 163.2p, its highest closing price in more than five years.

The wider market was testing seven-year highs, with the FTSE 100 index adding 82.5 at 6732.4. J Sainsbury eclipsed most other stories, with shares finishing higher by 25p at 590p. News that Delta Two, the Qatari investment fund, had increased its stake in the super-market group to 25 per cent led many to bet that a takeover offer in excess of 600p looked the most likely endgame. Separately, the fact that the story broke on options expiry day stoked some conspiratorial theories that another bid investor may have been timing stake purchases carefully.

The news on Sainsbury pushed some speculative money into the perennial takeover story Wm Morrison, up 7¼p at 308½p. Analysts reckon that Morrison's real estate portfolio is worth more than 90 per cent of its market value, making it another candidate to split into an operating company and property fund. However, both sides of the group are generally viewed as lower quality than Sainsbury.

While the grocers were the main talking point, mining stocks provided the market’s foundation. Lonmin was the top blue-chip performer, up £1.92 at £41.69 after Morgan Stanley named the platinum specialist its top sector pick.

Wolseley, the world’s biggest plumbers' merchant, took on 58p at £13.28. While talk of private equity interest did the rounds, as usual, the gain looked more likely to have been founded on the back of a possible bidding war for one of its US rivals.

Hughes Supply, which was put up for sale by Home Depot in February, has reportedly been targeted by two private equity funds willing to pay around $10 billion.

Broker comment aided Legal & General, which rose 4.3p to 160.2p after Cazenove raised its rating to outperform It said the insurer was likely to announce a £1 billion share buy-back next month Confusion over L&G’s plan to restructure its life funds, as flagged in November, has led investors to ignore an improving market, the broker added.

Drax Group was the main casualty, down 10½p at 765p. Goldman Sachs cut the power station owner off its “buy” list after raising its forecasted carbon credit costs.

Meanwhile, Tate & Lyle fell 1½p at 582½p after Morgan Stanley said 2008 consensus forecasts for the sugar refiner look too ambitious.

Carpetright led the mid-cap risers, up 314p to £13.40 after it confirmed that Lord Harris, its chairman and chief executive, was looking into taking the retailer private.

New York Stocks rose after the Labour Department said that core inflation excluding energy and food in May was 0.1 per cent, less than economists were expecting. The Dow Jones industrial average closed up 85.80 points at 13,639.50.

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