All eyes on Warburg and Thorn

The FT-SE index surged 27.8 points to 3,248.2 with the FT-SE 250 index up 13.5 to 3,542.8. Turnover was 688 million shares with 25,660 bargains. Government stocks were firm.

Takeover fever gripped the stock market, with SG Warburg and Thorn EMI again craving attention.

After a hectic session Warburg admitted it was in talks again - this time with the abrasive Swiss Bank Corporation.

At Thorn EMI silence reigned but traders were agog with speculation it was locked in negotiations with Walt Disney over the possible sale of its music division.

From the opening bell the market scented blood. Warburg quickly surged 54p to 829p; Thorn 63p to 1,2003p.

Behind the Warburg rush was what appeared to be an unlikely story that a deal was being lined up with US securities house, Smith Barney.

Just after Warburg shares closed at 821p the arrival of SBC at its City headquarters was revealed. SBC is not planning a bid for Warburg but wants, in effect, to merge its operations with its own. Its approach is likely to stir other interested parties, perhaps willing to mount a full bid.

What many regard as the UK's premier independent securities group and once the country's main bet for international honours has been the subject of intense takeover speculation since the talks with Morgan Stanley, the US group, were abandoned.

Merrill Lynch and JP Morgan, as well as MS, were among the names piled on the Warburg doorstep before Smith Barney reared its head, only to be replaced by SBC.

The excitement is bound to intensify the already rampant speculation in the financial sector. Mercury Asset Management, where Warburg has a 75 per cent interest, surged 68.5p to 861p.

The fund management group was blamed for the breakdown of the MS/Warburg talks. It will not, however, be involved in any SBC deal.

Thorn was inspired by suggestions its chairman, Sir Colin Southgate, met Michael Eisner, Disney's chief, to discuss the acquisition of the group's music division.

There is a suspicion that if Disney does not get its way and capture the music side it will bid for Thorn, worth about £5bn, and then sell off the parts it does not want.

Disney is said to be anxious to expand its music side, which has up to now been largely focused on soundtracks from its films.

Since Friday Warburg has risen 72p and Thorn 79p.

Speculation was not confined to the leaders.

Hicksons International, the chemical group, was back in the frame, adding 8p to 141p; UniChem, the chemists chain, added 6p to 271p as GEHE, the German group, won control of AAH.

The rest of the market surged to a new high for the year, with the FT- SE 100 index up 27.8 points at 3,248.2. An interest rate increase is now factored into calculations; so is a government hammering at tomorrow's local elections.

Arjo Wiggins Appleton, the packaging and paper group, shaded 2p to 264p with the house broker, UBS, said to have moved from buy to hold.

Body Shop dipped 23.5p to 152.5p following its results and Danka Business Systems continued to suffer from its figures, and the failure of an expected takeover to appear, losing another 12p to 373p. After last week's disappointing figures Cray Electronics slipped another 2p to 69p.

VSEL steamed ahead a further 13p to a 1,710p peak, awaiting the clearance of the British Aerospace strike. BAe rose 6p to 546p. GEC, also in the running, was little changed at 302.5p.

Laporte, the chemical group, rose 10p to 711p following an investment meeting at Barclays de Zoete Wedd; Ladbroke, 4p higher at 182p, was supported by a James Capel recommendation.

Unilever, up 10p at 1,229p, was helped by suggestions it was about to follow up the Colman's buy with a significant acquisition in Australia.

Waters were weak, ruffled by the Labour Party's declarations and talk that a leading securities house planned a bearish circular.

Suter, the mini conglomerate, added 5p to 170p, helped by an investment meeting at Butterfield Securities.

One share which missed the party was Upton & Southern, the struggling retailing group. With turnover put at almost 10 million shares the price closed 0.75p down at 1.5p after a string of deals went through at 1p.

Another cash call is feared following the disastrous takeover of the Reject Shops chain. In March Ron Trenter, formerly head of the Texas do-it-yourself chain, moved in as chairman. He has recently described Upton as being in "intensive care".

Langdons Foods, a tea and coffee group being split from Plantation & General, is raising £1.3m by selling shares at 3p. They are being placed with P&G shareholders with any not taken up placed by the stockbroker Ellis & Partners. P&G is retaining a 30.1 per cent interest. Langdons, which made profits of £240,000 last year, will keep half the flotation cash. Dealings start on 23 May.

PTS, the plumbing group, held at 96p after an upbeat statement from its chairman, David Sabire. Albert E Sharp, the stockbroker, believes profits this year will emerge at £2.5m, moving to £2.9m and then £3.5m. Analyst Robert Griffiths points out that many of today's central heating systems are nearing the end of their anticipated life. PTS was floated at 90p in March.