First predators are starting to focus on Mercury

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The Independent Online
Mercury Asset Management, the fund management group escaping from the shadow of SG Warburg, is beginning to feel the heat of stock market speculation.

Although Warburg's 75 per cent shareholding will not be distributed among shareholders until late summer as part of the Swiss Bank Corporation take- over, there is already a suspicion that would-be predators are jockeying for position.

The market has already alighted upon an impressive list of potential bidders. They include Barclays and National Westminster as well as GE Capital, the US investment group, and Charles Schwab, the US securities house which has moved into this country with the take- over of ShareLink, the no frills stockbroking business.

Others thought to be in the hunt are ABN Amro, the Dutch group owning Hoare Govett, and Dresdner, the German bank which seems to be linked with every available UK investment house. Commerzbank, which acquired Jupiter Tyndall, earlier this year, is another which could nurse a yearning for the Warburg investment side.

MAM shares put on 13p to 837p, pricing the fund manager at pounds 1.5bn; the market is thinking in terms of a 950p offer price. It was not the only financial group to attract attention. Insurances firmed with Cazenove and Warburg descending on Sun Alliance, up 8.5p to 357.5p. And Commercial Union drew strength from ABN Amro Hoare Govett support, gaining 10p to 640p.

Royal Bank of Scotland added 14.5p to 435p as Smith New Court put the shares back on its buy list. Smith takes the view that the bank's highly successful Direct Line insurance operation is not, as many suspect, going ex-growth and is impressed with its US operation, the Citizens banking group.

The market experienced a lacklustre session but, thanks to another powerful display in early trading in New York, managed to end with modest gains. Government stocks were sluggish ahead of today's Ken and Eddie meeting which seems certain to leave interest rates unchanged. The view in many quarters is that the next move will be downwards.

The FT-SE 100 index, moved between an 8-point advance and a 7.8 fall. It closed with a 3.4 gain at 3,380.0. However, trading levels again left much to be desired with traders complaining that many investors were still content to sit on the sidelines.

There was another outbreak of bid speculation on the drugs front with Fisons - enjoying rumoured buying by UBS - capturing much of the attention. In busy trading the shares jumped 8p to 181p with Seaq putting volume at nearly 10 million. Zeneca, Monday's hot tip, edged forward another 3p to 995p. One story circulating suggested that Zeneca, fearful of a hostile strike, had decided to barge into the proposed merger between Fisons and Medeva, down 1p at 244p.

The Fisons/Medeva negotiations have dragged on for an uncomfortably long time. Indeed the rumours of a possible deal first surfaced early this year.

The desire for defensive mergers has been strengthened by the Glaxo swoop on Wellcome. SmithKline Beecham was another drug share in demand with Morgan Stanley offering support, a stance the US house has adopted for some days.

Elsewhere Forte survived unscathed at 232p as Kleinwort Benson moved its recommendation from buy to hold but Ladbroke slipped 3p to 181p as NatWest Securities downgraded from pounds 170m to pounds 160m and from pounds 207m to pounds 195m.

Hepworth, the building materials group, eased 6p to 308p after Warburg cut its profit estimate from pounds 84m to around pounds 80m.

British Gas put on 1p to 310.5p. The shares have risen 11p since Cedric Brown's mauling by shareholders last week.

Body Shop's recovery continued with a 6p gain to 130p; Kingfisher was unchanged at 457p after a presentation at Henderson Crosthwaite.

Electricities had a bright session with the Seeboard figures offering encouragement. Seeboard gained 11p to 395p and Yorkshire, once the take over tip of the sector, 19p to 698p. Waters were flat with Thames off 8p, after 13p, on its figures.

T&N, the motor components group, attracted attention gaining 2.5p to 179p in often brisk trading.

VSEL was fairly actively traded as the market awaited the GEC counter strike. The shares rose 20p to 1,840p with GEC 2.5p lower at 325p.

Cadbury Schweppes, meeting analysts, lost 9p to 476p.

Lynx, the computer group selling its leisure equipment side, held at 48p; Borland, the US software group, jumped 125p to 925p.

Tullow Oil was busily traded following the investment presentation and its signalled intention to hive off its Pakistan operation. The shares rose to 53p, a peak, with Seaq putting volume at 2.5 million.

Booth Industries, a security doors group, improved 2p to 73p. It has sold a steel works site at Bolton, for pounds 2.65m, realising a pounds 1.8m profit. The group, which has lost pounds 2.7m in the past two years, is expected to return to profits this year. The shares were 47p when the Bolton sale was first mooted.

TAKING STOCK

o Welpac fell 1p to 9p as the struggling hardware products group admitted takeover talks were under way but warned that any offer could come in below the present market price. According to one source, the bid could be a low as 4p a share. The company has lost money for three years and its next set of figures, due later this month, are awaited anxiously. At the half-time stage, it lost more than pounds 1m - despite a pounds 2.7m cash call.

o European Colour, the pigments group, produced a 53 per cent profit advance to pounds 1.87m and the market is looking for around pounds 3m this year. The company, a niche player in the colour business, is casting around for acquisitions, possibly in speciality chemicals. The shares fell 2p to 83p.

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