Market Report: Takeover fever lifts BG, Prudential and RSA

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The insurance sector was also alive with bid speculation. Prudential rose 17.5p to 491.5p as dealers reported rumours that its French rival AXA might be mulling an approach. Royal & SunAlliance, up 4.25p to 100.5p, was the other large-cap insurance player talked of as vulnerable to a bid.

Second-line stocks were also boosted by merger and acquisition hopes. Hot money poured into Stanley Leisure, up 24p to 631p, and London Clubs International, 6p higher at 127.5p. According to yesterday's dealing room gossip, a tie-up between the two could soon be on the cards. The driving force behind such a deal is likely to be the Malaysian conglomerate, Genting Berhad. It controls 29 per cent of London Clubs and 20 per cent of Stanley Leisure.

However, analysts argued that if such a deal is going to happen, it will most probably come in the form of an all-share merger. This suggestion dampened London Clubs' stock, which peaked early during the session to touch a high of 142p.

Amid the bid fever, SSL International, which has long been tipped for takeover, rose 8.5p to 272p on hopes that its days as an independent entity are numbered. The purchase of SSL by a large international healthcare group certainly makes a lot of sense. A combination of the condom maker with the likes of Reckitt Benckiser or Johnson & Johnson could generate cost savings of up to £100m, analysts say, as distribution expenses at SSL could be slashed.

Woolworths, up 1p to 32.5p, also benefited from bid whispers. Some talked of a 45p-a-share offer for the retailer. But market professionals suggested the jump in the shares was more likely to have been caused by long-term bears of the stock finally closing their short positions.

Pilkington fell 1.75p to 151.5p as Credit Suisse First Boston put a question mark over Nippon Sheet Glass's ability to buy the UK glass maker. The Swiss broker said: "Although the industrial logic of putting the two companies together is compelling, the financial logic is less obvious. The real problem is how does Nippon Glass afford to buy a company approaching twice its size?" CSFB is convinced the Japanese group will not be able to buy Pilkington without a major equity fundraising or some kind of break-up of its target.

Mowlem, which, like Pilkington, admitted to being in offer talks on Monday, rose a further 2p to 200p. Bridgewell Securities slapped a sum-of-the-parts valuation of 233p on the construction group.

Elsewhere, DS Smith added 6p to 142.5p after UBS upgraded is stance on the packaging group to "buy" from "neutral". The Swiss broker suggested cardboard box makers such as DS Smith might soon be in a position to raiseprices as the difficult market conditions within the industry start to improve. UBS pointed out that shares in the packaging group have one of the most impressive dividend yields outside the FTSE 100. Even after yesterday's jump, the stock still yields about 6 per cent.

Meanwhile, the FTSE 100 closed 27 points better at 5,344.3, while the FTSE 250 gained 66 points to 7,77.1. PartyGaming added 6.25p to 93.5p after a strong trading statement from its online gaming peer 888 Holdings, off 4.5p to 166p. Charter ticked 3.5p higher to 391.5p as results from its rivals ABB and Lincoln Electric indicated that Charter's key markets are booming. Lincoln, which competes directly with Charter's Esab business, recorded a 20 per cent jump in third-quarter sales while ABB's power technologies division, which services the same markets as Charter's Howden division, reported a 30 per cent year-on-year rise in orders.

Lower down the pecking order, Whittard of Chelsea, the tea and coffee retailer, dropped 1p to 69.5p amid fears of falling sales at the group. Investors fear that like-for-like sales are well down on the year. Turbo Genset ticked 0.5p higher to 13.5p on news of a US contract win worth an initial $12.5m (£7.1m).

Melrose ticked 3.5p higher to 120p after David Roper, the chief executive of the engineer, bought 250,000 shares at 117p. Melrose shares have been in retreat since the start of September, when they hit a record high of 155p.

Finally, Centrom Group, steady at 4p, unveiled its first acquisition. The IT services group, which floated in June, spent £1m on a private company which takes Centrom into the information management arena. Investors should not be surprised by further acquisitions at the group.

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