Bid-happy investors bank on takeover at Schroders

MARKET REPORT

Schroders, the family controlled merchant bank, outpaced the rest of the stock market. Its voting shares soared nearly 7 per cent to 1,465p and its non-voters just over 6 per cent to 1,135p as the usual array of takeover bid stories swirled around.

With Barings, Kleinwort Benson and SG Warburg falling victims to overseas strikes the remaining independent City merchant banks have acquired a rarity value.

Of the four leading "gentlemanly, honourable, blue-blooded British merchant banks" only Hambros and Schroders have market roles; Robert Fleming and NM Rothschild have retained unquoted status.

Hambros and Schroders suffer every so often from bouts of market speculation. Last week the vulnerability of Hambros was underlined by the appearance on its share register of Regent Pacific, an aggressive Far Eastern fund management group.

Schroders has the protection of a family shareholding hovering just below 50 per cent. Despite the recurring flurries, the more considered market view is that the family is unlikely to be persuaded, in the present climate, to sell.

Other possibilities which enthral the market include enfranchisement of the non-voting shares and a suspicion the group will embark on the takeover trail; blue-blooded stockbroker Cazenove is one name often in the frame.

Interim figures are due tomorrow. They are not expected to be far removed from last year's pounds 85.6m. For the year, around pounds 197m, a mere pounds 1.6m increase, is expected.

One of the more bizarre theories behind the share surge was that Schroders is offering such fancy pay and incentive packages to recruit staff that it must be performing far more successfully than some of its followers suspect.

Head of equities is Philip Augar, ex-NatWest Securities. He has made a number of high-profile captures, some from his former house, as the group bids to rebuild its equity arm. His latest recruit, leading equity strategist Paul Walton, is arriving from Goldman Sachs.

The market regained some of Tuesday's fall with the FT-SE 100 index improving 16.8 points to 3,872.7.

Food retailers went south as another of those price war stories went the rounds. Tesco said it was cutting the price of 600 lines. Bill Myers at stockbroker Williams de Broe said: "Although Tesco's move is fairly innocuous the mere fact it is cutting prices won't do sector prices any good".

Tesco fell 9p to 291p; Asda 4.25p to 106p; Safeway 9.5p to 323p and J Sainsbury 8p to 376.5p.

On the cash and carry front, Booker jumped 22.5p to 383p on its surprise takeover bid for Nurdin & Peacock, up 68.5p to 200.5p.

Healthcare group Smith & Nephew added 4.75p to 203.5p allegedly on US buying; the suspicion the US giant, Johnson & Johnson, is keen to strike is never far below the surface. More contracts for Rolls-Royce lifted the shares 6.5p to 230p.

Vodafone, the mobile telephone group, was hit by rumours of more intense competition and talk that NatWest had adopted a more cautious stance. The shares tumbled 15.5p to 223.5p. Maid, the on-line information group, enjoyed a late run with prices of up to 322p recorded. The official close of trading mid-price was 310p.

There is persistent talk of corporate action with Reuters said to be eyeing the group. Merrill Lynch likes the shares. "Maid is on track to become another important UK-based media company in the tradition of Reuters and Reed," it says. A pounds 5.1m loss is expected this year with a pounds 15m profit next.

Yorkshire-Tyne Tees Television fell 32.5p to 1,177.5p as some took the view that the Granada bid, although seen as inevitable, could be a distant event. United Utilities firmed to 602p following analyst meetings. National Westminster Bank, up 10p to 669.5p, enjoyed Credit Lyonnais Laing support and Prudential got a push from ABN Amro Hoare Govett, gaining 7p to 432p.

Proposed staff cutbacks at Lucas Industries, soon to be LucasVarity, nudged the shares 3p higher to 236p and product rationalisation at Unilever was good for a 16.5p advance to 1,308p.

Tullow Oil was busily traded with the shares, fuelled by stories of oil strikes and takeover bids, up 5.25p to 114.25p. Lasmo has emerged as a possible bidder; it fell 2.5p to 195.5p. Ex-Lands, the property group, was another in the bid frame, gaining 1p at 11.75p in busy trading.

But Blenheim, the exhibition group, remained subdued, easing 3p to 331p.

TAKING STOCK

rTwo former Medeva executives could clear the way for takeover action at Lloyds Chemists. Their company, Medihealth, is bidding for Lloyds's wholesaling depots. With the warehouses unloaded, Gehe and Unichem would be allowed to resume their bids. Lloyds held at 496.5p.

rWilliamson Tea has made a rare move - from the main market to Ofex. More than 84 per cent of its shares are held by two groups. At 1,000p, it is valued at pounds 23m.

rSira Business Services, a cleaning group which made no secret of its acquisitive tendencies when it floated in April, is near to buying two localised cleaners and in talks for a national group. It took over a cleaning business in July. Profits last year were pounds 274,000 and around pounds 1m is likely this year.