Shares in Mitchells & Butlers (M&B) rose five per cent today despite the group revealing more than a quarter of a billion pounds-worth of hedging losses earlier this morning.
With the market awash with rumour that it could become a prime takeover target for groups such as Punch Taverns - which is believed to covet its asset portfolio - M&B's shares were trading at 400.5p, up 18.5p.
Punch chief executive Giles Thorley replied "No comment" when asked if his company was looking to buy M&B.
In an interim management statement released earlier today M&B said it had terminated inflation hedges and interest rate swaps which were put in place seal a financial package covering its proposed Opco/Propco joint venture with shareholder Robert Tchenguiz.
However, with the property venture now shelved and the credit crisis showing no signs of abating, the group said it could no longer justify holding its hedge positions and they had been closed out at a post-tax loss of £274m.
The loss prompted the resignation of finance director Karim Naffah, who will be replaced by deputy finance director Jeremy Townsend. Chief executive Tim Clarke's offer to resign was turned down by the M&B board.
M&B added that in the absence of a property deal, it would assess its "strategic options for value creation".
However, following a conference call with the group this morning City analysts said such a strategy review was questionable.
"This review seems to emphasise methods of extracting property value," said Panmure Gordon's Douglas Jack, who argued that today's share price hike was on the "expectation of a takeover".
"To us, this level of naivety is why the company is in so much trouble. Surely management is aware that property yields have already risen above M&B's cost of debt and its share price is above its current net asset value of 371p.
"Surely today's downgrades have taught it a lesson in relation to the perils of rentalising the asset base?"
As well as outlining the hedge losses, M&B revealed same outlet like-for-like sales of 0.7 per cent for the first 17 weeks of the current financial year, a performance described by a spokeswoman for the group as "resilient".
Same outlet like-for-like food sales rose 4.6 per cent in the period, while same outlet like-for-like drink sales down 1.1 per cent. Gross margins were coming under pressure as the smoking ban "accelerated the shift in the sales mix to food".
M&B told analysts it thought it was the smoking ban that was doing most damage to sales, followed by cheap supermarket alcohol and concerns about consumer confidence.
Meanwhile the City - and everybody else - awaits M&B's Thursday AGM with even more interest than usual.