Bunzl takes its turn as the popular takeover target


The takeover rumours that have infested sector after sector yesterday spread to paper and packaging and homed in on Bunzl, which reversed a fall in early trading to close 2p higher at 193p on speculation that International Paper of the US may mount a bid.

Almost 2 million Bunzl shares were traded, although a large part of the volume was said to be the tail-end of a sell order from an institutional investor.

Bunzl's shares have recovered steadily following the plunge to 55p during the height of the recession. At yesterday's closing price, Bunzl is worth more than pounds 850m. The company is now in rude health, a reflection of the clear-out of a hotch-potch of businesses by Tony Habgood since he became chief executive in 1991.

Despite the success of Mr Habgood's strategy and the accompanying surge in the share price over the last four years, however, the company is trading on a price earnings multiple of 12.9, which is below the market average of 13.6.

The main attraction for International Paper, dealers said, would be the company's commanding position in America for supplying packaging to supermarkets.

One dealer said that any move by International Paper could well raise the acquisitive sights of Jefferson Smurfit, the Irish company which has spent the last 20 years buying its way to pole position in the world league for paper and board makers. Shares in Jefferson Smurfit rose 7p to 187p. The Bunzl bid rumour was just one of dozens that sent share prices soaring. Even worse-than-expected inflation figures were only a minor irritant for a market that is convinced that the continuing spate of takeovers will be capped by the mother of all deals.

The speculative list of takeover targets is now so long that it is surprising that the actuarial profession has not devised a separate index to track their progress. Volume trading was good, with almost 750 million shares traded. There were more than 30,000 bargains.

Trading in shares and options of Grand Metropolitan, the international food and drinks group, was particularly heavy amid further rumours that Kohlberg Kravis Roberts, the American leveraged buy-out specialist, was considering a break-up bid. GrandMet is basically made up of three parts: the IDV drinks business, which is one of the biggest in the world; the Burger King fast-food operation; and food, which encompasses Pillsbury, Pet and Green Giant.

GrandMet's shares climbed 14p to 441p, which values the company at around pounds 9.7bn. More than 1,500 call option contracts, each covering 1 million shares at 500p each, were struck on the November series.

Continued excitement over the Lloyds Bank merger with TSB pushed Royal Bank of Scotland's shares 19p higher to 502p. The shares already traded at a premium to the banking sector, principally due to RBS's profits powerhouse, the Direct Line insurance business. Abbey National, ahead 21p to 570, is the market's favourite suitor mainly because the North-South geographical link would match that of the new Lloyds TSB group.

More than 10 million shares were dealt in RBS, and trading in Abbey National topped 9 million. A key 23 per cent of RBS is owned by just two shareholders - Banco Santander of Spain with 10 per cent and Mercury Asset Management with 13 per cent.

Gartmore shot up another 13p to a year's high of 289p amid strong speculation that the fund management group would be under new management by the end of next week. BAT Industries, the financial services and tobacco group, is tipped as one of the main suitors, along with National Westminster bank. Shares in BAT firmed 2p to 546p, and NatWest gained 9p to 621p.

Traders believe that the eventual buyer will have to pay more than pounds 400m for the controlling 75 per cent stake owned by Banque Indosuez.

Henderson Administration gained 11p to 1,224p, Invesco added 5p to 226p, and Perpetual advanced 33p to 1,740p, with investors convinced that the loser in the fight for Gartmore will launch a strike against another fund management group.

The media pitch was awash with rumours. Telegraph closed 6p higher at 436p despite denials from Pearson, up 3p to 611p, that it was considering a bid. There was gossip in late trading that Conrad Black would tighten his control over the Telegraph by splashing out pounds 30m for a further 5 per cent of the shares. He already controls 58.5 per cent of the stock.

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