City File: CU in shape for cash call

THE MARKET has had another attack of nerves over Commercial Union's proposed purchase of the French Victoire insurance group. The shares ended the week at 542p, the level they were at before the bid was announced, but 11p down on the day. The fears seem excessive: the rights issue, likely to be announced this week, will be nearer pounds 400m than the feared figure of pounds 600m. The acquisition looks astute, coming just as the French pension market is due for a massive boost from the proposed relaxation of the state's grip on the market.

SHARES in Argyll, the supermarket group, have come up sharply in the past few weeks and could show further strength. One buyer is thought to have snapped up three million shares last week at 272p, just above the 268p Friday close. But the optimism has been overdone. Although chairman Sir Alistair Grant was cheery about trading at last week's AGM, Argyll still faces problems with its Lo-Cost discount chain, while Safeway's expensive image may not help in the fierce grocery price wars now underway. Sell.

WHILE sales of new cars are revving up with the imminent arrival of M registration, some analysts are recommending caution over motor dealers' shares. NatWest Securities is forecasting a healthy uptick in interim profits on Wednesday from Lex, one of the biggest, but warns of 'little or no scope for sustained outperformance'. The shares have underperformed the market this year, ending the week at 464p against a 1994 high of 573p. But this is overly pessimistic. Helped by an improved management and a couple of acquisitions, Lex is well positioned for an expected consolidation of the sector next year when Britain's dealer franchise system is abolished. Buy.

WITH all quiet on the Lonrho front, shares in the mining and hotels conglomerate have drifted back to 128p from this year's 175p high. Analysts have concentrated on Lonrho's problems and largely ignored the potential value of its assets. The successful flotation of Ashanti Goldfields, in which Lonrho retains a large stake, shows that the sum of Lonrho parts could be worth more than its pounds 1bn market value.

In its latest Mining Review, broker James Capel points to a rosy outlook for platinum. Lonrho controls two low-cost producers, Western and Eastern Platinum in oh-so-fashionable South Africa. Capel says Lonrho 'remains a highly attractive play . . . currently trading at around a 40 per cent discount to its break-up value . . . a strong buy.'

UBS SECURITIES has gone bottom fishing. On Friday it announced it had taken control of 17 per cent of Whessoe, the troubled engineering group, whose shares plummeted from 264p to 119p after a series of disasters, including a pounds 2m claim on a natural gas project in Greece, and a fall in half-year profits from pounds 4m to pounds 1.9m accompanied by a warning that profits were unlikely to improve much in the short term. But the worst may be over for Whessoe: it has finally sold its troubled engineering division, though the market is still more interested in the company's recent problems than its recovery potential. There is also the chance of a bid for what is still a respected name. Worth a punt.

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