In its annual results statement yesterday ICG warned there is an imbalance between risk and

In its annual results statement yesterday, ICG warned there is an imbalance between risk and reward in the buyout industry with little margin for safety in a number of transactions.But far from fearing a downturn, ICG believes it will be able to take advantage of any shake-out by taking mezzanine finance positions off the hands of distressed sellers cheaply. Private equity firms must invest the money they are given and increasingly pay higher and higher valuations for buyouts, which eats into their returns and makes the deal they do more risky. In addition, ICG charges a fee for managing £3bn of mezzanine finance funds on behalf of institutional investors.The battle facing the group today is to decide which of the many buyouts to back and which to pass on. The company helps finance leveraged buyouts and, given the colossal amounts of money being thrown at the private equity firms doing this type of takeover, few are surprised by the demand for ICG’s services.The group provides what is called mezzanine finance (or mezz in finance industry parlance), a mixture of debt and equity. It earns high interest on the debt part and gets an option on an equity stake which it can cash in when the business is sold on or floated. Our view: Buy

Share price: 1,278p (-53p)
Intermediate Capital Group finds itself in the enviable position of being able to reject record numbers of potential new deals. The shares dropped a penny, a reasonable performance given the weakness in the oil sector..

The company is developing assets in the North Sea and hopes to produce 10,000 barrels of oil per day by the beginning of 2008. The shares listed at 100p after a joint placing by the brokers Mirabeau and Jeffries, rising £28.3m. Shares in the group, which is involved in developing treatments for “superbugs”, leapt 422.25p to close at 925p, a rise of 84 per cent, although some traders said a bid well in excess of the current price is unlikely.Finally, there was a quiet first day of dealing in Ithaca Energy, a oil exploration and production group that listed on AIM and in Toronto. The shares climbed 8.9 per cent, 9.5p, to 116p.The star performer in the small caps was Neutec Pharma after confirming it was in discussions that may lead to an offer for the company. Although the company reported a pre-tax loss of £1.6m it expects to move back into profitability this year and will launch a range of broadband services this year. Normally, pre-IPO investors would be subject to a lock-in period immediately after a public offering.

The shares dropped another 2p to close at 31p, as more than 2 million changed hands.The retail utility provider Telecom Plus pleased the market by giving a positive outlook along with full-year in line with market expectations. One market maker described the placing as “a disgrace” after pre-IPO investors – some of who were thought to have paid 5p per share – were allowed to sell as soon as trading began. Tullow has fallen almost 20 per cent in the last month.In the small caps there was a second bout of selling in Brinkley Mining after a disastrous first day of dealing on Monday that saw the shares close at a 34 per cent discount to the placing price of 50p. The broker Merrill Lynch recently increased its target price on the shares to 1,300p and bulls think good news from Vietnam could see the shares make a significant move towards that target.Elsewhere in the FTSE 250 oil stocks, Soco International dropped another 26.5p to 1,197.5p and Tullow Oil, a stock that until last week looked like a candidate for promotion to the FTSE 100, shed 20p to 351p. News is expected from the Dua and Blackbird-1 wells, and market chatter is that there could be encouraging developments. Amvescap fell 30.5p to 486.5p, the worst blue-chip performer, while Man Group was 114p worse at 2,330p and Schroders, 45p lower at 1,000p, also dropped more than 4 per cent.Asset managers were followed closely by the usual array of mining companies and groups with high exposure to the US dollar, with Xstrata down 119p to 1,939p, Anglo American off 104p to 1,992p and Wolseley losing 53p at 1,150p.In the second-line stocks, Premier Oil weakened along with the rest of the market, falling 38p to close at 925.5p, but traders are expecting solid drilling results in the next 10 days or so from two potentially “high impact” wells in Vietnam.

The relegation of Cable & Wireless, 1.25p lower at 103p, and Ladbrokes, 8.25p weaker at 387.25p, will come as no surprise to market watchers, while Daily Mail & General Trust finished on a poor note, dropping 20.5p to 623p.Elsewhere in the FTSE 100, the 199-point fall in New York on Monday made for a depressing day, with the market failing to get into positive territory and closing 92.3 weaker at 5669.8, as the Dow quickly followed suit into triple-digit losses for the second session on the trot.Not surprisingly, given the weak markets, asset managers were hardest hit. There will have been nerves at Lonmin too, as the stock closed 152p weaker at 2,413p, scraping in at number 86. Drax closed 5p lower at 818p, making it the 88th largest company quoted in London.Traders said the promotion of the two mining groups is likely to create more volatility in the blue-chip index, which is already heavily weighted towards the commodities sector. The power generator Drax Group also looks like getting promoted, replacing the newspaper publisher Daily Mail & General Trust.
Despite falling 126p, almost 9 per cent, to 1,285p, Vedanta booked its place in the top flight by ending the session as the 80th largest quoted company on the London markets. Any company in the top 90 by market capitalisation is automatically included in the FTSE 100. The quarterly index reshuffle is announced today, with the mining groups Vedanta Resources and Lonmin looking certain to move up into the FTSE 100, while the gambling group Ladbrokes and the struggling telecoms group Cable & Wireless moving out.

Moving in or out of the major indices can have a significant impact on the short-term performance of a stock due to tracker funds buying and selling stock. The shares may even be a buy again.j.warner independent.co.uk. Yet the impasse could never have been broken without some kind of compromise.Mr Jones and Sir Ken have been at daggers drawn virtually from the moment Mr Jones joined the board to bolster corporate governance a year and a bit ago. In bringing in a new broom as chief executive after the disaster of the Safeway’s takeover, Mr Jones has finally fulfilled his duties.