THE one million small shareholders who sold out of O2 at 130p in February may be feeling a little miffed, having missed out on yesterday’s 200p-per-share bid from Telefónica. Those whose shares were compulsorily purchased because they failed to return the form in time or were away will be furious.

For those still fortunate enough to be shareholders, however, there is little to complain about. By almost any measure, Telefónica’s £17.7 billion offer looks generous. For a start, it’s in cash, which is much more desirable than the Spanish paper offered by the last Iberian bidder for a FTSE company — Santander for Abbey National. There is also is a loan note alternative for those with tax concerns.

It’s at a 22 per cent premium to Friday’s closing price, which itself was already buoyed by bid fever, and is double the level that the shares were fetching a year ago. It values O2 at a pricey 20 times next year’s forecast earnings. Or, to put it in more graspable terms, it values each of O2’s 24.6 million customers at an eye-catching £723.

Who would have thought it, but after yesterday’s price surge O2 is now worth more than BT, the company it was demerged from four years ago. We could almost be back in the telecoms, media and technology bubble.

The shares soared to 205.75p by the close yesterday on faint hopes that the agreed deal could flush out a rival offer. Deutsche Telekom and KPN, of the Netherlands, could bid singly or jointly.

Deutsche, in particular, is seen as a credible bidder. Because of the overlap with O2 in both Germany and the UK, it could squeeze out much larger savings than Telefónica, and — so the theory goes — it could therefore afford to pay much more.

Yet both putative bidders have had plenty of time before now to make bids and have failed to do so, or done so at a much lower price. KPN reportedly offered under £10 billion last year.

Then there are the regulatory risks. That overlap would make monopolies investigations in Germany and Britain a near-certainty. At worst, these could derail a deal. At best, they would delay it by many months.

While the shares remain above 201.5p — the bid price plus a promised 1.54p interim dividend due on December 2 — shareholders might do well to remember the bird-in-the-hand philosophy and sell in the market.

Clinton Cards

THE consumer freeze has hit most retailers, and Clinton Cards is no exception. Greetings cards may be downturn- resilient — people will continue to send a card when they can no longer afford a present to go with it — but they are not immune. Fewer people are going shopping and therefore fewer are entering the 1,400 shops trading under the Clinton and Birthdays franchises.

The result has been falling like-for-like sales in both chains and a collapse into the red for group in the six months to July. A £3.6 million pre-tax profit last time turned into a £12.2 million loss.

Unfortunately, the company’s problems are also partly self-inflicted. The £46 million purchase of Birthdays last December has not gone according to plan. Restructuring and repositioning the business has taken longer than expected. In addition, there have been computer problems.

These are now resolved, according to Clinton Lewin, the managing director. And the reforms and new ranges are beginning to show through in the cash registers. Like-for-like sales at Birthdays have turned positive again in the latest 12 weeks.

Yet the main Clinton chain is hurting more than ever, like-for-like sales declines getting worse. Moreover, Clinton is not in the best shape to withstand a prolonged consumer go-slow. It took on heavy debts to bankroll the Birthdays acquisition and the interest bill has soared.

The dividend may have to be cut if things do not improve. The tasty 5.5 per cent yield is the main thing at the moment propping up the share price.

Clinton could shrink back relatively painlessly at present, according to Lewin. There are plenty of coffee shop and phone shop businesses prepared to take on its leases. But if the downturn were to intensify, that lifeline would vanish.

Clinton is operationally highly geared, a pick-up in consumer spending would transform its prospects, but, peering 18 months into the future, that doesn’t seem to be the way to bet. The shares, which fell another 2.75p to 65p yesterday amid analyst downgrades, are best avoided.

Wogen

WOGEN, which made its debut on the lightly regulated AIM market yesterday, presses all the fashionable investor buttons. The company trades exotic metals such as molybdenum, titanium and indium — the stuff used in high-resolution television screens. For investors who believe in the resources “super-cycle” (the theory that raw material prices are in for a 15-year bull ride), it looks well-placed. For those who buy into the China story, it stands out, having been there since 1976.

This is a high-risk business. Wogen takes physical delivery of minerals, not always with an end-using customer signed up. Adverse price movements and defaulting counterparties can smash profits. Even so, it has managed to stay in the black for 29 of its 33 years. At the 122p placing price, it trades on two to three times net assets, just four times this year’s earnings, and yields 6 per cent.

The founder has partly sold out. The sponsor is Bridgewell Securities, whose last stock market debutante was Wham Energy, which has just flopped. Buy, but only if you’re prepared to lose your shirt.

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