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Cable and Wireless soars on talk of takeover by BT

Cable and Wireless was the best-performing blue chip as the suspicion grew BT had overcome what many had thought was an insurmountable takeover hurdle.

The shares rose 7p to 412p on speculation the Government had indicated it would not stand in the way of Britain's biggest ever corporate deal, providing BT was prepared to sell C&W's Mercury telephone business.

Rumours have buzzed for some weeks that BT was contemplating a Cable swoop. But the obvious regulatory difficulties tended to tarnish the story. If BT has obtained Whitehall blessing then Cable, already looking vulnerable to attacks from break-up marauders, could become the stock market's hottest bid candidate.

BT would, it is assumed, have little difficulty selling Mercury; the American AT&T giant, already sitting on 20 per cent of the telephone operation, is believed to be keen to acquire control.

By selling Mercury and Cable's intriguing 57.5 per cent interest in Hongkong Telecom, BT could recoup most, if not all, of its Cable outlay. BT, said to be still undecided whether to mount a bid, held at 394.5p.

Telephones did not provide the only rising mercury. Shares of Mercury Asset Management, the fund manager soon to emerge from the shadow of SG Warburg, gained 11p to 835p as speculation its independence will be short- lived continued to flourish.

The market has already lined up an array of likely predators including Barclays and the US group, GE Capital.

Warburg edged ahead 10p to 763p. Some talked about a new offer but the gain was probably due to the view the shares represented a cheap way into MAM. Kleinwort Benson, however, was again the star of the banking pitch, gaining another 13p to a 701p peak.

The market is still captivated by rumours a 775p-a-share offer has arrived in the Kleinwort boardroom. The banker is said to be seeking around 900p.

There is more than a little debate about the identity of the bidder, with the German duo, Dresdner and Deutsche, the front runners. But some are prepared to bank on the Dutch group ABN Amro.

The rest of the market had a lacklustre session, with blue chips pulled higher by New York and seemingly unruffled by Tokyo's 34-month low.

There was little active investment activity, with many traders peering disconsolately at their screens. The FT-SE 100 index, measuring the top 100 shares, was squeezed 6.9 points higher at 3,344.6; the gain was over 10 points if allowance was made for dividend payments. But the bulk of the market looked decidedly forlorn, with the index reflecting the leading second liners, the FT-SE 250, down 19.6 to 3,659.3.

GEC added 5p to 325p as some speculators swung behind the view it had out gunned British Aerospace for VSEL. Even so the shipbuilder hovered just above the GEC terms.

Berisford had a horrid time, falling 39p to 219p as its results prompted worries about its Magnet kitchens operation.

Unigate was lowered 3p to 401p on its results. Thames Water, off 19p to 480p, and Anglian Water, 21p at 519p, suffered from ex-dividend status.

Glaxo Wellcome gained 11p to 745p on Kleinwort support; Zeneca recovered an early fall to close a shade firmer at 1,040p.

A NatWest Securities recommendation and the increase in the Sun's selling price lifted Mirror Group Newspapers 3.5p to 137.5p.

Tesco was firm at 298p, helped by a NatWest profit upgrading, from pounds 660m to pounds 675m.

House of Fraser had another tricky session, falling 7p to 144p; Kingfisher dipped 2p to 455p following more director selling. Philippe Francis has disposed of 277,000 shares to an insurance plan.

Scottish & Newcastle rose 3p to 544p as Warburg placed the rump of its convertible rights issue. The cash is intended for the planned Courage acquisition.

Bellwinch, the house builder, tumbled 6p to 22p following a profits warning.

Tadpole Technology weakened again, falling 9p to 76p.

Thomas Locker, the engineer suspected of nursing some rich assets, made further headway following the arrival of John Carr, a property man, with 21.61 per cent of the votes. The ordinary shares jumped 3.5p to 27p and the non-voters rose 1p to 19.5p.

Before the Carr arrival the ordinary shares were 18p and the "A" 15.5p.

Merrydown, the struggling cider group, dropped 6p to 74p. It has been squeezed by its bigger rivals, HP Bulmer and Taunton Cider. The group expects a small loss in the year that ended in March. In April it forged a link with Whitbread, which has agreed to sell Merrydown cider in its pubs as well as meeting advertising costs. Merrydown, hoping for a sharp sales advance, is concentrating on the take-home trade.