Army contract takes some of the shine off takeovers

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The Army's pounds 2.6bn helicopter order almost, but not quite, overshadowed the stock market's fascination with takeover bids.

As another of the long-running favourites - Smith New Court - admitted it was in talks, there was some anxious debate about the fate of the Army contract.

Favourite to win the prize is the Apache, produced by Westland, the GKN offshoot.

Victory has already been factored into GKN shares, flying at a 682p peak. If it should be forced to bow to its rivals, GEC and British Aerospace, there are fears the shares could crash by more than 40p.

GEC fell 1.5p to 310.5p and BAe rose 6p to 628p.

The confirmation from Smith that predators were circling its Farringdon Road headquarters, on the edge of the City, sent the shares up 20p (after 43p) to 511p.

The securities house was in the bid frame even before financial shares were engulfed in the latest excitement.

The Smith admission tended to highlight the attractions of some of the remaining bid candidates.

Zeneca continued to defy gravity, climbing another 25p to 1,139p, its highest closing level since the drugs group was split from Imperial Chemical Industries two years ago.

Smith & Nephew continued to attract attention with Johnson & Johnson, the US group, still the name in the frame. The shares rose 1.75p to 192.75p.

On the electrical pitch, South Wales emerged as the punters' choice, up 34p to 818p. South Western fell 12p to 927p as the mooted bid failed to materialise.

The FT-SE 100 index fell 13.4 points to 3,450.6 in moderate trading. The rush of corporate action should, it is felt, help keep the market firm.

If, as suspected, Smith falls to an overseas group, yet more cash will be available to be pumped into the market.

Already, this year has produced pounds 9bn from the Glaxo takeover of Wellcome and pounds 1bn will be available from the Dresdner Bank swoop on Kleinwort Benson. About pounds 860m (in cash and shares) will come from the Swiss Bank Corporation takeover of SG Warburg and Smith could command about pounds 400m.

Although giving ground the market still comfortably soaked up some big lines of stock. Barclays de Zoete Wedd placed 5 million Dixons, lowering the price 4p to 283p. Smith handled the placing of 3 million Marks & Spencer, down 2p to 433p.

But there was uncertainty over the fate of a 13 million Royal Bank of Scotland sale by UBS. The securities house attempted to carry out the trade at 422p. Indications were that about a third of the business was completed.

Royal shares were weak before UBS attempted its sale programme. The price had been damaged by news that Direct Line, the Royal insurance off-shoot, was cutting some of its prices by up to 20 per cent.

Abbey National, the building society turned bank, put on 14p to 494p as NatWest Securities came out in favour of the N&P takeover. Reuters slipped 10p to 550p with Lehman and NatWest cautious.

Govett, the fund manager, jumped 27p to 297p. A US court has dismissed a pounds 12.5m claim and the company expects to sell its John Govett investment business for pounds 125m by the end of the month.

With the Scottish & Newcastle bid for Courage still under Whitehall scrutiny there is a growing conviction Bass, down 2p to 654p, will emerge as the buyer of Allied Domecq's 50 per cent stake in Carlsberg Tetley.

Allied, up 6.5p to 554.5p, recently disappointed the market with a cautious trading statement, prompting profit forecasts to be pulled back. It has made no secret of its desire to get out of brewing and concentrate on pubs and spirits.

Bass, no doubt miffed at the possibility of being overtaken by S&N as the UK's leading domestic brewer, could reclaim the lead by buying CT.

Carlsberg, the Danish brewer with the other 50 per cent may, however, be a reluctant seller. Whitbread is also thought to be talking to Allied about CT.

Supermarkets were ruffled by SG Warburg take profits advice. Argyll fell 12p to 352p and Tesco 7p to 317p.

United Biscuits, which has been undergoing one of its periodical takeover flurries, eased 8p to 325p with BZW said to be negative. Guinness fell 10.5p to 497p with James Capel making negative noises.

Fairline Boat tumbled 48p to 360p on the mandatory Renwick offer but David Lloyd Leisure edged ahead 4p to 267p with First Leisure, up 2p at 320p, said to be thinking of bidding.

Calluna fell 10p to 44p. The computer disk maker has fretted about supply problems. It lost pounds 2.2m in its last year.

Surrey Free Inns, which moved from the 4.2 market to AIM on Friday, fell 10p to 70p.