Keenly awaited takeover fails to hearten investors

MARKET REPORT
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The Independent Online
The big take over bid the stock market so desperately craved duly arrived - and shares drifted lower.

After peaking last week shares have looked decidedly uncertain with fresh New York records steadfastly ignored and dealers citing another interest rate cut and a big bid as the two events that would reassure the market.

The rate cut is still awaited but media Lords Hollick and Stevens duly produced a deal that should have won over any faint hearts.

For a while shares took up the chase but by the close the FT-SE 100 index was off 17.7, a two-day fall of 39.1 points.

It seems the reverse takeover aspect of the United News & Media deal with MAI disconcerted the market and persuaded many it was not the sort of get-together to provide the impetus shares needed.

There are also continuing worries about New York which has surged dramatically since the start of last year, comfortably outpacing London.

But the tendency to pay more attention to New York weakness than to its strength has prompted the thought that if the Dow Jones Average does take a turn for the worse London could suffer a savage mauling.

NatWest Securities, however, remains optimistic. It forecasts that more bids, lower rates and a quickening economic pulse will propel London (and other markets). The investment house sees Footsie around 4,000 by May.

Second-line shares, as measured by the supporting FT-SE 250 index, again displayed more resilience than their blue-chip brethren with the index edging closer to a new high.

The media merger, although failing to encourage the market as a whole, certainly created high excitement in the media sectors.

MAI surged above the United News offer price, jumping 69p to 448p as the market banked on a counter-strike. United News stretched 28p higher to 652p.

Carlton Communications, down 32p at 1,022p, is seen as the most likely to attempt to interfere by bidding for MAI. The spotlight also hit Yorkshire- Tyne Tees Television, up 53p to 900p and Scottish TV, 12p firmer at 606p.

Among newspapers Mirror Group Newspapers gained 6p to 207p and the Telegraph 8p to 463p. Pearson,at one time 34p higher, ended 5p firmer at 690p. Midland Independent Newspapers, seemingly out of the action, sacrificed some of its recent strength, falling 4p to 149p.

Most of the takeover favourites were out of fashion with Bank of Scotland off 7.5p to 285p, Standard Chartered 15p at 600p, Smith & Nephew 2.5p to 187p and Ladbroke 3p at 172p.

But Ladbroke's pounds 27.5m takeover of London's Barracuda Casino produced a speculative flutter among the independent gaming groups. London Clubs International gained 8p to 474p and Capital Corporation 7p to 217p.

National Westminster Bank was ruffled by a Merrill Lynch profit downgrading, falling 9p to 658p. Rexam fell 9p to 356p with SBC Warburg moving from hold to reduce.

BT gained 2.5p to 359p on its results and Amstrad jumped 18p to 201p following its confident statement and dividend increase. Tepnel Life Sciences rose 10p to 58p on hopes of new developments. A cash call is expected. The shares have climbed 21p this week.

Zeneca added 8p to 1,250p following its plan to buy Glaxo Wellcome's new migraine treatment which some believe could be a bigger seller than Glaxo's existing Imigran drug. Celltech, unsettled by its decision to drop its asthma drug, staged a modest rally, up 38p at 518p.

Cable & Wireless firmed to 457p. James Capel upgraded its estimates for the group's Hong Kong Telecom offshoot and Merrill Lynch suggested a break-up value of between 550p and 600p.

Lloyds Chemists, backing German bidder Gehe, rose 3p to 470p. But the market remains optimistic that Unichem will return with a higher offer, around 475p. Unichem fell 3p to 245p.

Stylo, the shoe retailer, stepped out 16p to 113p as the controlling Ziff family acquired shares but Abacus Recruitment lost some of this enthusiasm, drooping 9p to 46p.

The lower gold price took its toll with Joel off 15p at 90p and Bakyrchik 21p at 485p.

Enterprise Oil was busily traded, gaining 6p to 364p and Monument Oil & Gas improved 0.75p to 60.5p as NatWest said buy.

Mersey Docks & Harbour fell 34p to 403p as workers involved in the bitter strike rejected, by 271 votes to 50, the latest compensation offer.

TAKING STOCK

r Cairn Energy gushed 21p to 193p, highest since 1991, following successful testing in Bangladesh. There is talk the strike could represent a big jump for the company. Bangladesh is thought to offer exciting oil and gas prospects. Cairn plans to drill a neighbouring block. Societe Generale Strauss Turnbull fancies the shares.

r Surrey Free Inns frothed ahead 5p to a 170p peak. Nigel Popham at stockbroker Teather & Greenwood rates the shares a buy and says profits should reach pounds 1.1m this year, hitting pounds 1.8m next. The company has 23 pubs and a landbank of 10 sites. Each new outlet should be capable of adding at least pounds 100,000 to profits, he says. "A bid from a larger company, at a significant premium, to the current share price is a possibility", he adds.

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