MARKET REPORT : Bid-happy investors turn their microscope on L&G

Another ramp - or the mega-takeover bid the stock market so desperately needs?

Legal & General, the insurance giant, was the group under the microscope as stories swirled that National Westminster Bank, keen to expand, was about to strike.

L&G jumped 35p, settling, in busy turnover, at 670p, up 29p. Perhaps significantly the advance was achieved on a day when most blue chips were uncertain and the FT-SE 100 index lost 18.2 points to 3,519.6.

L&G shares are, however, at their all-time high, a remarkable achievement considering the uninspiring outlook for the company and the insurance industry.

NatWest is known to be casting around for a significant acquisition . It is set to realise more than pounds 4bn from the sale of its US banking side and has made no secret of its desire to re-invest in the financial sector. Although its has apparently turned down the relatively small Gartmore fund management group, it could decide to descend on Mercury Asset Management or pick up another bank.

Intriguingly, L&G has some pounds 36bn under management, an inviting target. But if it did bid for L&G, NatWest could find itself embroiled in some difficult areas of the insurance market which prudence would suggest it avoided.

There is no doubt the takeover mania in the US banking industry is enhancing the value of NatWest's transatlantic banking arm. HSBC, the Far Eastern group that takes in Midland Bank and has significant US interests, is being named as a likely buyer. NatWest fell 19p to 637p and HSBC 6p to 938p.

The bank did not have the L&G field to itself. Allianz, the German group which has been linked with virtually every UK insurer since it bid unsuccessfully for Eagle Star more than a decade ago, was restored to the frame.

Some even speculated about a German bank emerging as the predator, with Deutsche Bank the popular guess.

The L&G excitement lifted other insurers higher. But Royal, until now the favoured bid target, held at 383p.

The L&G surge demonstrated the market's conviction that mega-bids remain in the pipeline. A strike for the insurer would cost around pounds 3.5bn and would provide the impetus a flagging market clearly needs.

Bluebird, the toys group, is not in the mega-bid class; even so it was once again hauled into the takeover pit as the US toys group, Hasbro, decided to convert loan stock into equity, collecting a 6.7 per cent stake in the process.

Why should Hasbro switch into equity at this stage? The market is convinced it was a warning shot to Mattel which could be eyeing Bluebird.

The US group has the rights for Walt Disney characters in Europe; Bluebird has the UK licence. A Mattel bid for Bluebird, therefore, makes sense. Hoping for a bid battle, Bluebird was hoisted 3p to 360p, after 369p. The shares have raced up 100p since the Disney deal was announced earlier this month.

Royal Bank of Scotland, until recently riding high in the takeover charts, had to contend with another MAM sale; the fund manager cut to 11.98 per cent. MAM has been easing its RBS load, indicating it is unwilling to believe the takeover story swirling around. RBS shares firmed 2p to 519p.

Elsewhere, British Petroleum weakened 7p to 470p on Lehman Brothers caution and Thorn EMI continued to suffer from a share overhang, thought to be a 2.5 million line, falling 25p to 1,469p.

Negative comment on Zantac, the ulcer drug, in an influential US publication lowered Glaxo Wellcome 8p to 852p. Reckitt & Colman lost 13p to 678p on talk of a significant acquisition in the Far East.

Holiday shares were unsettled by a 30 per cent bookings slump. Airtours fell 9p to 320p and First Choice 6p to 65p, perilously close to its right issue level.

Plantation & General held at 60p as it produced its expected sharp profit advance and confirmed talks to sell property in Indonesia; computer group Northamber put on 6p to 231 on its trading statement and Casket firmed 0.5p to 8p on talk of a counter-bid to the EFG shot.

DFS, the furniture group, rose 11p to 346p as the Kirkham family placed 22.6 million shares through NatWest Securities at 328p. London Clubs International, the casino group, fell 10p to 410p. The Barclay brothers, David and Frederick, said they intended to sell their 24 per cent interest.

Alvis, the defence equipment group, jumped 7p to 149p on an overnight deal.

TAKING STOCK

o Philip Green, the retailer owning the Owen Owen and Lewis's department stores, is thought to be looking in the direction of Baldwin, the holiday and restaurant group. There is talk Mr Green and his associate, clothier Harold Tillman, are wondering about linking their catering operations with Baldwin. There has long been talk of unease in the Baldwin boardroom. Ong Ben Seng, a Singapore businessman with a 29 per cent stake, is thought to be at loggerheads with chief executive Sandy Singh. The shares held at 163p.

o Regina, the royal jelly distributor, held at 14p as one of its main shareholders, Antonion, converted a loan into shares at 15p. Antonion is owned by director Horatius Da Gama Rose and his family. It now has 29.5 per cent of the struggling group.