Blue-chip bid rumours send prices sharply higher

MARKET REPORT

The speculative mill continued to work at full pelt yesterday, and dealing rooms were awash with a rumour that a huge bid for an FT-SE 100 stock would be made on Monday morning. The list of potential blue chip targets is long and includes Grand Metropolitan, BAT Industries, Cadbury Schweppes, Thorn EMI, Schroders and Royal Bank of Scotland.

Whether the rumour is true or not, market-makers were taking no chances and pushed share prices sharply higher. "I've never known anything like this," one seasoned trader said.

If all the bid rumours flying around the market were to turn into reality there would be a drastic reshaping at the top end of corporate UK. The fact that the already lengthy list of rumours grows by the day owes much to the fact that a great many deals are actually happening, and not just in the electricity sector.

Corporate financiers are already dreaming about their fat Christmas bonus cheques, and perhaps of more to come next year. But the problem with the current market is the confusion being created for investors who, judging by yesterday's trading volume figures, are reluctant to take chances.

At one stage of yesterday's heady proceedings the FT-SE 100 Index, which soared almost 50 points in the previous session, was sporting an advance just short of 61 points. While some of the froth was blown off in afternoon dealings, the index still closed 44.2 points higher at 3,568.0 - just shy of the all-time high of 3,570.8.

The surge, though, was not supported by buying activity, either from private investors or big institutions. Barely more than 600 million shares had changed hands by the final bell. And by the time brokers had made their final tally of the day's trading, the figure had only risen to 683 million.

Grand Metropolitan was again the focus of much attention. The price climbed 13p to 454p, and more than 14 million shares were traded.

The shares are enjoying one of their strongest runs for some time, with the drive upwards being fuelled by speculation only. Most of the speculation homes in on a break-up bid being made by Kholberg Kravis Roberts, the American leveraged buyout specialists, or Grand Met selling its IDV drinks business to American Brands.

There was another suggestion that IDV might even be sold to its arch- rival Allied Domecq, ahead 9p to 525p. One analyst believed, however, that the mark-up in Allied's shares owed more to a separate rumour that Michael Jackaman, chairman, would retire next year and be succeeded by Sir Christopher Hogg, who became non-executive deputy chairman last year.

Demand for shares in Royal Bank of Scotland was heavy in very late dealings, and the price closed 20p higher at 522p, with more than 4.6 million traded. National Westminster Bank, up 18p to 639p, and Abbey National, 2p firmer at 572p, are rumoured as potential suitors.

NatWest is also said to be at the front of the charge to buy Gartmore, up 3p to another year's high of 292p. BAT Industries, also tipped as a possible buyer of Gartmore and itself the subject of a break-up rumour, advanced 9p to 555p.

Still in financials, Schroders soared by a full pound at one time as its name was re-entered on the speculative bid list. Volume trading in the bank, which is 40 per cent family owned, was tiny at less than 263,000. The name of NatWest even featured in this particular strand of gossip.

Lloyds Abbey Life, however, fell 5p to 471p with talk of a line of 5 million shares being on offer. Legal & General put on a late spurt to finish 12p better at 640p.

Thorn EMI shot up 54p to pounds 15.06 amid the revival of talk that the company's own break-up plans would be pre-empted by a full-blown bid from Viacom or Disney. But once again, the price rise took place in a trading vacuum, with only slightly more than 1 million going through the books.

Trading in Cadbury Schweppes was, however, reasonably heavy at almost 6 million. The shares, which started the week at 497p, firmed a further 1.5p to 547p with the rumour of a bid from Unilever, down 8p to pounds 12.64, refusing to die down.

A raft of buy recommendations and changes of stance by analysts lifted several stocks. Forte rose 5p to 249p as NatWest, a long-time bear, changed from reduce to hold.

Analysts at UBS appended the buy tag to several retailers including Kingfisher, 4p better at 510p, Argos, up 5p to 491p, and Dixons, 2p better at 386p.

The session's casualties included Colorvision, off 7p to 40p as the OFT warned it might revoke its credit licences.

TAKING STOCK

r There was further gossip of possible stake-building in the USM tiddler BCE Holdings, which has been transformed from a distributor of snooker and pool tables into a profitable computer games company. More than 1.3 million shares were dealt, and the price rose 0.75p to 19.5p. A similar number of shares were traded on Thursday.

r Sketchley, trading at a year's high of 143p, is extending its range of shareholder perks. As from next month shareholder discounts will be widened to include 10 per cent off photo-processing at the recently acquired SupaSnaps, 10 per cent off all retail items at Sketchley and SupaSnaps and 25 per cent off the normal list prices for Sketchley dry cleaning bills. The price of qualification is high, however. Investors must own at least 1,000 shares.