Market Report: Bid talk inspires highland fling at Bank of Scotland

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The Independent Online
BANK OF Scotland was a ray of sunshine in a dark market yesterday amid talk of a takeover bid from a larger rival.

The tartan-clad lender bucked the falling FTSE 100 to cash in on a 12p rise to 679.5p on whispers of an imminent strike at a premium to the current price.

The turnover figure - that all-important indicator that something is afoot - showed a higher-than-usual 10.8m shares, a clear sign that the rumour had legs.

There were a few mooted predators but the name of Lloyds TSB, down 19.5p to 745.5, appeared to be on everyone's lips.

The reasons for a takeover are quite sound. The black horse bank has often said that the recent purchase of mutual insurer Scottish Widows was just the beginning of a spending spree which could also include a UK bank.

Despite splashing pounds 7bn on Widows, Lloyds is awash with cash and would be able to afford to a multi-billion pound bid for BoS. Dealers speculated that a bid of some pounds 10bn, or around 800p a share, would be more than enough to win the hearts and minds of shareholders in the Scottish bank.

In strategic terms, a takeover of BoS would add to Lloyds' muscle north of the border. The high street lender acquired a fair number of Scottish branches after the merger with TSB, but a tie-up with BoS could turn its strong presence into outright dominance. The whispers suggested that the two companies could even say something before BoS's interims next week. However, sceptics pointed out that the Lloyds board was rumoured to be focusing on a European buy and that a large takeover so soon after the Widows deal would be difficult to digest.

They said that BoS could go to other hungry rivals, such as Halifax, 9.5p higher to 684p, even though the Yorkshire bank was also rumoured as a possible partner for Royal Bank of Scotland, 11p better at 1,154p.

Remaining blue-chips were savaged by a cocktail of bearish international factors.

The FTSE 100 plunged below the psychologically-important 6,000 barrier with a 99.2-point tumble to 5,957.3 - its lowest level in more than seven months.

The finger of blame was firmly pointed at the Dow. The New York index was showing a 166-point fall at the London close after turbulence in the foreign ex hange and bond markets.

Dealers' nerves were tested by the Bank of Japan's decision not to intervene to stop the yen's rise against the dollar and to dash hopes of a rate cut.

Bonds and currencies were further unsettled by a higher-than-expected jump in the US July trade deficit.

The overseas convulsions also hit the second liners. The FTSE 250 domestic exposure did little to cushion the blow and the index fell 67.4 to 5,787.4. The Small Cap was also down, shedding 21.6 to 2,747.7.

Corporate action, real and rumoured, helped a few blue-chips to stay afloat. Telecom equipment maker GEC beeped 15.5p better to 592.5p on rumours of a bid for the high-tech division of Philips and the sale of its 24 per cent stake in France's Alstom.

Drinks group Allied Domecq rose 7.5p to 349.5p on revived talk of a bid from France's Pernod or Canada's Seagram. However, sector peer Bass poured 23p lower to 762p on fears that tomorrow's trading statement could bring bad news on its pubs.

Engineer Invensys was hoisted 6.5p higher to 303.25p on talk of a sale of its automotive division to Sweden's Trelleborg and upgrades from Lehman Brothers and Morgan Stanley.

Vodafone Airtouch rang up a 16p rise to 1,319p after confirming its mobile telephone deal with US rival Bell, while Rolls Royce powered 2.75p ahead to 218p as CSFB went positive on its bid for marine engineer Vickers, unchanged at 246p.

Rival Orange rose a juicy 9p to a record 1,140p after unveiling plans for a video-phone. The mystery-maker of the handset could be Ofex-traded Motion Media, 5p higher to 100p.

Publisher United News & Media firmed 3.5p to 607p ahead of a US presentation on its Internet strategy. Rival Pearson rose 12p to 1,250p on talk of good trading in its web businesses.

No such luck for Freeserve, results next week. The Internet provider, nicknamed "Freefall", dropped 9p to a record low of 137p on concerns about users' numbers.

Oils were hammered by fears over the crude price and nerves ahead of today's Opec meeting. BP Amoco shed 20p to 1,089p, while Shell dropped 18p to 466.5p. Granada plunged 29.5p to 538p on talk of a bearish presentation to analysts. Chip designer ARM Holdings beamed 21.5p higher to 924.5p on cynical hopes that its Taiwan-based rivals will be hit by the earthquake.

Insurance broker Bradstock rose 2.5p to a 12-month-high of 63.5p on talk of an imminent 70p bid from a rival.

Paper group DS Smith firmed 5.5p to 165.5p on rehashed hopes of an offer, just like chemical groups BTP, 11p higher to 397.5p, and Yule Catto, 8p better at 313p.

Cement maker Rugby, another old bid chestnut, crumbled 11.25p to 90.75p after bad interims. A strike, maybe from rival RMC, 9p lower at 932p, is possible.

Holiday group Airtours nosedived 2.5p to 408p on strong rumours that its bid for First Choice, 4.5p lower at 143.5p, will be blocked by the European Union.

Oil and gas minnow Pan Andean flared 2.25p higher to 21.5p on whispers of a major find.

Packaging group Boxmore wrapped up a 1.5p rise to 127.5p on rumours of a 170p-plus bid, while TV producer SKD Media, the old Sleepy Kids, firmed 2p to 27.5p on vague talk of a merger.

Events organiser ITE Group rose 1p to 56p after buying rights to two biscuits and pastry exhibitions in Moscow.

Troubled computer group MSB International plunged 24p to 152.5p on fears that its 5 October results could contain a profit warning.

SEAQ VOLUME: 1.17BN

SEAQ TRADES: 83.862

GILTS INDEX: 103.47 -0.37

THE BIOTECH minnow Protherics rose 2p to 42p on whispers that the US drug watchdog could soon approve its compound against rattlesnake venom. A swift decision will enable the company - formed through the recent merger of Proteus and Therapeutic Antibodies - to sell the drug in time for the lucrative spring season, when snakes bite. There is also talk of licensing deals for the firm's drugs against high blood pressure and blood clotting.

MARKS & SPENCER, down another 11p to a five-year low of 327.75p, could soon announce the arrival of its first ever marketing director. Market players believe that, after an eight-month search, the retailer has picked an external candidate with experience in overseas retail. The mystery appointee will sit on the main board and will replace acting marketing boss James Benfield, who will remain in charge of store operations and the directory business.

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