Market Report: Baltimore's Intel deal talk puts big hitters in shade

THE MARKET'S big hitters yesterday were eclipsed by the software minnow Baltimore Technologies.

The maker of Internet security programmes, formerly called Zergo, clicked 92.5p to 877.5p as the announcement of a major deal sparked talk of a tie-up with the US semiconductor giant Intel.

Punters logged on to Baltimore's shares after the group said that a consortium of major banks will use its products to protect their e-commerce and e- mail.

But the real reason for the excitement was not in the official announcement. Punters are convinced that this latest deal will convince Intel to double its stake in Baltimore. The US chip maker acquired a 6 per cent stake back in January when Zergo and Baltimore merged. According to the whispers, Intel is prepared to go up to 12 per cent by subscribing for new Baltimore shares at up to pounds 10 each.

Daring traders said that the stake increase - expected to be announced shortly - could even lead to a takeover, given Intel's need for Internet exposure.

However, the semiconductor maker could come up against American computer rivals such as Microsoft, which could also have a pop at Baltimore.

As for yesterday's announcement, the blue-chip financial houses - including ABN Amro, Bank of America, Barclays Bank and Chase Manhattan - have agreed to use Baltimore's programmes to issue "digital identity cards" to their 5 million corporate customers around the globe to prevent Internet fraud. The deal could be worth up to $150-$200m to Baltimore over the next few years.

The prospect of a successful foray into e-commerce also helped mail order groups N Brown, up 22p to 377p, and GUS, up 5p to 744p. Traders believe that the two have got the right infrastructure to benefit from a surge in web shopping.

As the Internet-related stocks soared away, the FTSE 100 had a volatile session. The blue-chip index started higher but retreated sharply just before the close and finished 17.1 lower at 6545.5 as the Dow fell prey to profit-takers. A bearish note from the respected Bob Semple and David McBain of Deutsche Bank did not help. The former BT Alex.Brown duo cut their year-end FTSE 100 forecast to 6,000 from 6,350, amid fears of a rise in bond yields and a liquidity drain.

The FTSE 250 was having none of that and powered to its sixth consecutive closing record after a 11.4 rise to 6,089.7. The Small Cap was also in good nick and jumped 13 to 2735.1.

Fund managers, usually a sleepy bunch, were excited by bid talk. Amvescap rose 13.5p to 654.5p on persistent whispers of a strike by cash-rich Goldman Sachs. Schroders, up 17p to 1454p, could also be on Goldman's shopping list. Perpetual moved 172.5p higher at 3,780p on speculation that a deal is near. The company has appointed Merrill Lynch to look at its options and Norwich Union, down 9.25p to 423.25p, and Halifax, down 21p to 721p, are two mooted predators.

Fellow fund manager Singer & Friedlander firmed 1.5p to 136p. The shares are cheap and Close Brothers, unchanged at 792.5p, could be interested.

Alliance & Leicester rose 12.5p to 842.5p as Goldman Sachs put it on its European recommended list and set a 1,010-1,060p target.

No such luck for Royal & SunAlliance. The insurer plunged 26p to 556.5p after the $1.4bn purchase of US rival Orion. The market believes that the acquisition will make a merger with CGU, down 17p to 931.5p, much more difficult.

BOC firmed 11p to 1387p amid talk that the takeover by Air Products and Air Liquide is imminent.

In the non-bid zone, BP Amoco, flared 39p higher to 1,259p after a significant gas discovery in Azerbaijan and a Merrill Lynch upgrade. The US broker increased BP's target price to 1,350 from 1,150p due to rising oil prices. Merrill also pushed Shell 0.75p higher to 537.5p after moving its target from 550p to 600p.

SmithKline Beecham shot 21p better to 860.5p on hopes of bumper numbers at its forthcoming interim results. Some traders switched into SB from Glaxo Wellcome, down 18p to 1,750p.

Yesterday was a day of debuts. Hull phone group Kingston Communications began conditional dealings with a a 68p rise to 293p in huge volume and immediately attracted takeover rumours.

South African insurer Old Mutual opened with a 17.5p rise to 137.5p, while pub group XS Leisure served up a 7.5p rise to 72.5p on its first day on AIM. Telecom equipment maker BATM moved to the main listing with a 215p jump to a best-ever 1,740 after director David Goldman made over pounds 2.1m from a share sale. A bullish note from Apax and vague takeover rumours caused the rise.

Wassall jumped 38.5p to 263.5p after the pounds 184m sale of its adhesive business. The acquisitive conglomerate is tipped for a takeover of up to pounds 1bn. Former conglomerate Tomkins shed 8.75p to 290.75p as Merrills downgraded after confirmation of the bread division demerger. Picture booths operator Photo- Me snapped 42.5p higher to 880p on talk that venture capitalists are preparing a bid. Pilkington, up 3.5p to 101.5p, is also thought to be on private investors' radars. Plant hire group Ashtead headed the midcap fallers' after crumbling 15p to 164p on disappointing finals.

The minnows were struck by takeover fever. Property group Merivale Moore soared 23p to 119.5p after confirming that it is in offer talks. Rival Warner Estates, down 1.5p to 219p, is the rumoured predator. Restaurant tiddler Hatford firmed 0.75p to 2p after unveiling bid talks with OFEX- listed rival Montana. Silver Shield was 0.75p better at 2p on rumours, confirmed after the close, of an approach for its windscreen division. Electrical group Silvermines rose 7p to 30p on returning bid rumours.

SEAQ VOLUME: 1.4bn

SEAQ TRADES: 80,593

GILTS INDEX: 106.36 +0.66

A TAKEOVER of security group Norbain looks a safe bet. The maker of close-circuit television kits shot 109p higher to a 12-month peak of 334p yesterday after announcing that it is in offer talks. Insiders believe that the mystery bidder might be Norbain's management. However, the MBO approach could flush out a trade bidder such as the US groups Pittway and Ultrak. A trade war could push the final price close to 400p-per-share, valuing Norbain at around pounds 40m.

AIM TRUST is having a good time. Shares in the investment trust rose 9p to a record 112.5p. The market likes its exposure to wonder stock BATM Advanced Communications. A further two of the trust's investments - TV programmes group Winchester Entertainment and syringe maker NMT - are also having a good run. The trust - whose shares trade at a 25 per cent discount to assets - plans to capitalise on its successes with a marketing drive to attract retail punters.