BAe advances further as GEC bid rumours persist

Rumours that GEC, headed by Lord Weinstock, will make a bid for British Aerospace refuse to die down. Shares in BAe rose 9.5p to 747p yesterday, which compares with the 527p they traded at when GEC outbid the company for VSEL, the submarine maker, in June.

Analysts reckon GEC would have to bid upwards of 900p a share to win control of BAe, a company it has tried to court in the past. At the current price, BAe is worth almost pounds 3.2bn.

A bid for BAe is seen by some as one of the prime reasons why Lord Weinstock continues in his job at the age of 71, several years beyond the normal retirement age. Shares in GEC also did well yesterday, rising 12p to 329p - only 9p shy of this year's high.

Trading in GEC shares was higher than normal at 24.5 million, although part of the total was due to a cross of 3.6 million.

The performance of GEC and BAe yesterday contrasted with most of the other leading 100 shares, which only just managed to remain in positive territory by the close.

Wall Street was largely to blame for the lacklustre session. A 28-point overnight drop on the Dow Jones index unsettled early dealings, and a softer opening during afternoon dealings yesterday in London put the brakes on most of the leaders.

The FT-SE 100 share index closed just 4 points higher at 3,524.2, having been 11.4 better on lower than expected consumer credit figures before Wall Street kicked in. Volume trading totalled 711 million.

British Airways was by far the best performer among the FT-SE 100 constituents, closing 20p higher at 472p. Volume trading was heavy, with more than 11 million going through the books.

The rise was in response to USAir, the 25 per cent owned associate, announcing it was in talks with American Airlines and United Airlines. Analysts said a full bid for USAir may have to be pitched around $20 a share, a big premium to the recent $11.50 the shares have been trading at.

British Airways is seen as being in control of what may become a bidding war between American and United. "Assets don't really matter, it's the strategic value," said Richard Hannah, analyst at UBS.

Most of the day's business was governed by a handful of special situations, and the electricity sector was unusually quiet, despite Texas Energy Partners increasing the bid stakes for Norweb.

The Americans' higher offer is worth pounds 10.85 cash a share, which is 10p more than the pure money put on the table by North West Water but less than the rival suitor's cash and paper terms.

Norweb finished 5p better at pounds 10.87 and North West Water eased 1p to 591p. Few dealers believe that the bidding war is yet over, and expect north West to up the ante once again.

With the electricity sector fast diminishing in numbers, eyes are turning towards water shares for the next round of mega-bids. Northumbrian Water rose a further 20p to pounds 10.33 with many predicting bid action soon from Lyonnais des Eaux-Dumez.

Severn Trent, also widely tipped as a takeover target, advanced 10p to 659p and Anglian firmed 4p to 593p.

Biggest howler of the day was from Euromoney, which crashed 312p to pounds 10.83 on a profits warning. A major shareholder, Daily Mail & General Trust, fell 20p to pounds 12.65p.

First Choice, the UK's third largest tour operator, remained in the doldrums, losing another 5p to close at a year's low of 65p - just 5p above the rights issue price announced on Monday.

Among the main winners was Compass, the catering group, which increased 17p to close only 1p below this year's high at 441p. The uplift was generated by news of a $250m contract to provide catering services to IBM. Leisure analysts said the five-year contract, won by its recently acquired US subsidiary, Canteen Corporation, could add up to pounds 2m a year in pre-tax profits.

P&O was a firm market, rising 2p to 490p ahead of tomorrow's presentation to analysts. There is some faint speculation that P&O will move soon to buy the Cunard Line from the troubled Trafalgar House, a penny better at 28.5p.

News of a boardroom reshuffle lifted Granada 7p to 647p, although the rest of the leisure sector looked flat.

Elecphorectics had a sparkling debut on the Aim market. Shares, which were trading at 140p on the 4.2 facility last week, finished at 160p.

Pittard finished 1p better at 45p on talk of a pending announcement about property disposals.