Market Report: Boost for Evode tightens seals against Wassall

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The Independent Online
THE 80p-per-share hostile takeover bid by Wassall, the mini-conglomerate, for Evode, the sealants maker, was virtually kicked into touch yesterday. Evode's shares rose by 5p to 96p, buoyed to some extent by arbitrage dealing on the pounds 94m bid.

However, some traders said that gambling on hopes of a white knight could be a dangerous game to play. They also said that Wassall was unlikely to change its bid tactics at the whim of the market.

Wassall, after all, refused to be bludgeoned by market stories of white knights when it succeeded in its bid for Metal Closures in early 1990.

In that vein, there were rumours yesterday that Williams Holdings might be prepared to rescue Evode from its plight.

However, sources close to the company said that Williams was intent on keeping its head down, aiming to make existing businesses more profitable.

They also said Williams may well want to keep a low profile, avoiding the pitfalls of aggressive action in the wake of its embarrassing failure to take over Racal Electronics last Christmas.

Some leading analysts have yet to make up their minds about Wassall's offer. Presentations by Evode last week and again yesterday have not been strong enough to sway the market one way or the other, one analyst said.

The only consensus appears to be that Evode's true value probably lies above 100p a share, and an increase in Wassall's offer to around 95p could prove a knock-out blow.

Evode was one of only a few talking points in a market that was desperately looking for a sense of direction. Morning trading was subdued despite another overnight gain on Wall Street and a better performance in the political cauldron of Hong Kong.

The afternoon session was more refreshing, however, with the market warming to a clutch of analysts' buy recommendations, a late programme trade by Morgan Stanley and British Petroleum's decision to lop nearly 14p a gallon off petrol prices.

BP itself, however, missed the fun. Three houses turned negative on the stock on fears that there would be no dividend growth in the next couple of years, and the shares lost 4p to 224p.

Other oils were also softer, particularly exploration companies because of a further weakening in the dollar. Enterprise dipped 9p to 447p, and Lasmo shed 8p to 154p.

British Gas continued to suffer from the Ofgas submission to the MMC on pipeline charges, losing a further 3.5p to 270.5p.

Despite the falls in BP, British Gas and other leading constituents, the FT-SE 100 overturned an initial 8.8-point deficit to finish at 2,769.8, up 15.3. Volume trading was respectable at 605 million shares, with quality second-liners again claiming much of the attention on their inherent recovery potential.

The make-up of the FT-SE 100 could change today. There was speculation that Rolls-Royce, down 1p to 101p, and BET, unchanged at 83p, could be replaced by Royal Insurance, ahead 5p to 265p, and Standard Chartered, which rose 13p to 523p.

Advances among the second-liners again included Pilkington, which added 3p to 83p ahead of its interim results tomorrow, and Lex Service, up 2p to 265p.

There were mixed performances among the large batch of company results. Vaux, a notable underperformer in recent years, climbed 6p to 216p despite a drop in profits and a large write-down of hotel values.

Buoyant results at Carlton Communications ran up against profit-taking, and the price eased 2p to 717p. Volume was brisk, reaching almost 4 million.

Elsewhere, Legal & General, which has underperformed the market for the best part of two years, had a lively session as Morgan Stanley reiterated its buy recommendation. L&G gained 14p to 423p, with 3.6 million shares traded.

'We have met with the company and are more positive on the outlook for mortgage indemnity business. They have suggested there is light at the end of the tunnel,' said Youssef Ziai, an analyst at Morgan Stanley.

L&G imparted its own thoughts about gilts: 'The 30-month bull run in the gilts market has a little further to go, but has now entered its final leg.'

L&G has recently switched out of gilts into overseas bonds, because it expects sterling to fall another 5 per cent in the new year.

Tadpole Technology, which made its debut on Monday, soared further away from its 65p placing price with a 28p rise to 113p amid strong institutional demand. Emess put on 3p to 10.5p, on the pounds 22m sale of its Tenby subsidiary.

Share prices registered reasonable gains across the board, largely on the back of a rally in afternoon dealings. The FT-SE 100 index recouped an early 8.8 point fall, and closed at 2,769.8, up 15.3 on the day. The FT-SE 250 advanced 7.7 points to 2,682 and the narrower FT 30 climbed by 7.1 to 2,091.2.

Lonrho caught the eye late in the day, closing 1p higher at 74p after being a couple of pence down for most of the session. There was a rumour doing the rounds that 'Tiny' Rowland, chairman and chief executive, could announce a pounds 200m disposal today to add to the pounds 475m the international trading company has already reaped this year from asset sales. Volume was 1.3 million.

Sage Group was one of the main movers, climbing 21p to 455p. Analysts upgraded proift forecasts for 1992/3 to pounds 10.6m, after the business software group reported a rise from pounds 6.6m to pounds 8.9m for the year to 30 September. The dividend was lifted from 8.05p to 9.02p. The cash-generative Sage also announced the purchase of Yorkshire Business Forms, for a maximum pounds 4m.