First Leisure, which tried to buy David Lloyd before it came to market at 150p a share in March 1993, has been tipped over the past few weeks as the mostly likely suitor.
However, leisure analysts believe that First Leisure, up 1p to 325p, has missed the boat and that a takeover bid is more likely to be made by Rank Organisation which has more than enough resources to make an all- cash offer. Rank has been frustrated in two attempts to expand in the past year. They were the bids to run the National Lottery, and for the MGM cinema chain, now firmly in the hands of Virgin.
Lloyd's shares rose throughout yesterday's session. One delayed trade at 300p was registered on dealing screens after the close of business.
One analyst said yesterday that Rank "could well afford to pay the goodwill" to buy David Lloyd, which takes its name from its founder and the former Davis Cup player. Mr Lloyd has a stake of about 10 per cent, with the rest of the equity mainly in the hands of institutional investors.
The analyst added that it was surprising that Rank had not yet moved into the successful and fast-growing health and fitness business.
There was also a separate industry rumour yesterday that Rank was about to pay about pounds 17m for the privately-owned Paramount Bingo, which owns the three largest clubs in the UK. Shares in Rank fell 3p to 425p. The company runs Butlins holiday and Warner holiday camps, Top Rank bingo clubs, cinemas and has a large stake in the Rank Xerox office equipment group.
The movement in Lloyd's share price contrasted with the rest of the leisure sector, particularly the tour operators because of worries over the number of unsold foreign holidays. Industry observers said travel companies were finding it increasingly difficult to sell the rump of summer holidays left on their books. The consensus is that up to 1.5 million holidays remain unsold.
Airtours, the second-largest tour operator behind the Canadian-owned Thomson Group, fell 8p to 387p, and First Choice, the third-biggest, dipped 1p to 96p. Both prices are lows for this year.
Generally, the market sported all the characteristics of the holiday season. Volume trading was thin with investors content to wait and see the contents of this week's Bank of England report on inflation.
Fresh concerns that interest rates may have to rise kept leading share prices in negative territory for most of the session. The FT-SE 100 shares index, which reached a high for the year on Friday, closed 5.6 points lower at 3,463.3 despite Hanson's long-awaited bid for a regional electricity company.
The deal was bad news for the list of companies thought to be in Hanson's acquisitive sights. They included the Argyll supermarkets group, down 5.5p to 337.5p, and United Biscuits, off 3p to 297p.
Hanson may have to fight hard, however, to win its pounds 2.5bn agreed bid for Eastern Group. Dealers believe the bid will be referred to the Monopolies and Mergers Commission.
Eastern's shares soared 209p to 909p, compared with Hanson's 975p cash offer. More than 11 million Eastern shares were traded. Hanson fell 1.5p to 218.75p.
The volume trading in Eastern was one of several special situations that flattered the stated total market turnover of 667.4 million shares. In particular, more than 141 million shares were traded at just 0.5p each in Orb Estates, the property minnow.
Adjusting for double counting, the turnover amounted to slightly more than 5 per cent of Orb's issued equity. Orb closed unchanged at 0.75p.
An agency cross of 8.36 million shares in British Steel also flattered the volume trading numbers. Cazenove, the blue-blooded broker, was believed to be involved in the deal. British Steel eased 0.5p to 188p, and more than 26 million shares went through the books.
Shares in Grand Metropolitan, the international food and drinks group, fell 14p to 376p, mostly in late trading amid worries about the effect of sterling's strength against the dollar. A large part of GrandMet's profits are earned in the US through its Burger King fast-food business, its IDV spirits subsidiary, and the Pillsbury food company.
Smith & Nephew were back in demand, rising 2p to 193p on fresh talk of a pounds 2.6bn take-over bid from Johnson & Johnson. Elsewhere, Vodafone was unsettled by talk that it was on the verge of expanding in the US and fell 6p to 239.5p. De la Rue, weakened by a lacklustre trading update last week, lost another 21p to 864p.
Forte firmed 3p to 262p ahead of tomorrow's trading statement.
FT-SE 100 3463.3 -5.6
FT-SE 250 3826.0 +4.2
FT-SE 350 1723.5 -1.8
SEAQ VOLUME 667.4m shares, 26,019 bargains
Gilts Index 92.5 +0.05
o Alpha Airports, the in-flight meals company, shows no signs of climbing above the clouds that have hung over it since it floated 18 months ago at 140p. The shares slipped 1p to 139p. There was gossip yesterday that Forte, the hotels group, may soon sell its remaining 25 per cent stake and also that Alpha was close to expanding its in-flight catering operations in the US.
o Shares in Steel Burrill, the Lloyd's insurance broker, were one of the day's best performers, rising 14p to 110p. A string of delayed trades at up to 117.5p appeared on dealing screens after the close. There was some speculation that Alexander Howden, controlled by A&A of the US, was lining up a bid. Steel Burrill is valued at more than pounds 57m by the latest market price.
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