Market report: Bid talk brings 6,000 in reach

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The Independent Online
IT WAS back to basics yesterday, with takeover activity - real and rumoured - driving the market higher.

Defence, drugs, insurance and, once again, telecoms dominated the day's proceedings, helping Footsie put on 78.8 points to 5,958.2, its best level since shortly after the July 1998 peak of 6,179.

Vodafone's confirmation of its interest in the AirTouch Communications of the US sent another exhilarating surge through the telephone wires as speculators hunted for the next possible deal. In heavy trading Voders charged 61.5p to 1,110.5p, a peak. Orange rose 33.5p to 828p and BT 49.5p to 988.5p.

Telewest Communications, with Warburg Dillon Read offering support, was the best-performing Footsie constituent, up 19.5p to 205p. Cable & Wireless gained 22.5p to 779p and the seemingly irrepressible Colt Telecom managed an 84p jump to 1,037p.

Suggestions of a counter bid for Zeneca put drug shares on a high: Zeneca climbed 80p to 2,774p, and Glaxo Wellcome, everybody's favourite to barge into the proposed deal with Sweden's Astra, gained 104p to 2,233p. SmithKline Beecham, another possible interventionist, put on 33.5p to 887p.

General Electric Co, said to be deep in discussions with a range of defence groups, rose 22p to 555.5p, with Cazenove thought to be advocating a 600p target. The long-running defence power game has already thrown up an array of permutations with, at one time or another, most of the various groups married off to each other.

Current suggestions include GEC's Marconi arm merging with British Aerospace, 14p higher at 519p, although there is also speculation about a BAe deal with DaimlerChrysler. Speculation continues about GEC linking with top US groups such as Lockheed Martin.

On the insurance pitch it was GRE, the old Guardian Royal Exchange, attracting attention. Once again it was said that a deal was imminent, with many expecting an announcement today. The popular guess was a combined swoop by Axa of France and Prudential Corporation, with a few bits and pieces being picked up by, possibly, Independent Insurance. A price north of 375p is the popular guess; but GRE shares firmed only 2p to 346p.

LucasVarity, the aerospace and car parts group, was another on the takeover production line. The shares gained 7.5p to 215.25p on reports, which the Anglo-US group significantly failed to deny, that it was in talks with two US groups. Any such deal would allow LV to hop the Atlantic, a move institutional investors blocked last year.

BP Amoco was again the most traded share in the wake of the giant merger. With a 57.8 million recorded turnover, the price fell 8.5p to 916p.

Underperforming properties encouraged the euphoria, with CSFB, longtime bears of the sector, thought to have become more positive. ABN Amro was another believed to be more bullish about bricks and mortar. It was enough to lift Land Securities 29.5p to 800p and Hammerson 18.5p to 372p. Chelsfield gained 15.5p to 270p.

Although much of the action was concentrated on the bid-influenced sectors, the market had a firm foundation. It was influenced by a strong New York and continuing hopes that base rates will be lowered tomorrow.

The euro made little impression, although Irish banks again prospered, with Bank of Ireland up 57.5p at 1,430p. The smooth arrival of the new currency also boosted Reuters 32.5p to 672p.

But it was another poor day for Imperial Chemical Industries. Its failure to sell its Tioxide operation pushed the shares down a further 17.5p to 474.5p.

Retailers were out of favour, with more profit downgrades hitting the market, although mid cap constituent JJB Sports firmed 17.5p to 262.5p. House of Fraser, on takeover speculation, gained 2p to 55p and Next added 21.25p to 513.5p following Henderson Crosthwaite support. The mid cap index rose 19.2 points to 4,870.2, and the small cap 6.9 points to 2,089.7.

A profit warning from electrical group Diploma produced a short circuit, lowering the shares 41p to 122.5p. Electronics group Servomex ended little changed at 127.5p (after 147.5p). It denied it was in bid talks.

Dalkeith, the former pubs chain, returned following its reverse takeover of IT operation Expertise at 33.5p, down from 35.5p. Many IT shares were ruffled by a poor performance by SAP, the German group, with London Bridge Software off 47.5p at 1,240p.

Greenalls, the hotel and pubs chain, fell 13p to 307.5p after Charterhouse Tilney caution. Engineer Cobham responded to HSBC support, rising 33.5p to 713.5p.

Mice, the exhibitions and point of sales group, held at 19.25p. There are suggestions it is on the verge of clinching contracts worth pounds 6.5m.