The rise sparked furious speculation about an impending deal and yesterday Whitbread, the leisure and brewing giant, said it had agreed a take-over. Whitbread is paying pounds 578m, or 390p a share, for Swallow to double the number of its Marriott hotels and challenge Hilton Group, which leads the UK luxury hotel market.
David Youngman, an analyst at WH Ireland said: "It looks like an amazing coincidence, doesn't it?" The Stock Exchange does not comment on individual cases, but has a policy of investigating all unusual share price movements, particularly ahead of price-sensitive announcements. Peter Catesby, Swallow's chief executive, said: "I'm quite sure there was no leak from my side of the fence."
A spokesman for Whitbread said the company had not yet been contacted about the matter and could not comment on how they would respond to an enquiry from the LSE.
Yesterday's announcement sent shares in Swallow, formerly known as Vaux, a further 79.5p higher to close at 387p. But it did little to bolster Whitbread's share price, which rose 3.5p to 574p. The stock has plummeted since the company's abortive bid for Allied Domecq's pubs division last summer. David Thomas, Whitbread's chief executive, said he hoped the Swallow deal would help his company to "draw a line" under the Allied disappointment.
Mr Thomas denied Whitbread had overpaid for Swallow, describing the price as "sensible". The price tag represented a 41 per cent premium to Swallow's opening level last Friday. The deal is expected to produce about pounds 10m a year in cost savings as of 2003. Whitbread will spend pounds 50m on converting most Swallow hotels to the Marriott brand.
Mr Thomas said there would be no job losses in the hotels themselves but that the 170 positions in Swallow's Sunderland head office were at risk. Mr Thomas said he intends to dispose of the non-hotel assetswithin the next six months.
Analysts' attention is now focused on Greenalls, the leisure group that is understood to have held talks with Swallow about a possible merger. Speculationcentred on the possibility of Whitbread adding Greenalls to its portfolio once it has digested the Swallow acquisition.