Market Report: Buffett sale talk not good for Guinness

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HAS Warren Buffett, the legendary US investor, fallen out of love with Guinness?

Shares of the beers and spirits giant tumbled 11p yesterday to 462p, their lowest for nearly two years, as stories circulated that a big line of stock was on offer.

The US investment house Morgan Stanley was said to be trying to tempt institutional buyers. But when the market closed there appeared to be a wide gap between the price Morgan expected and what institutions were prepared to pay.

Morgan would not, however, be the obvious choice for Mr Buffett. He is, after all, chairman of its rival, Salomon Brothers, which could be expected to claim the business. But, as some cynics pointed out, the use of Morgan could be a bid to mask the identity of the seller.

Mr Buffett, through his quoted investment vehicle, Berkshire Hathaway, built his stake in late 1991 and the early part of last year. He is thought to have paid nearly 644p, the Guinness peak, for some of his holding. The Buffett stake never reached the disclosable level. Some suggested it touched 2.9 per cent; others thought nearer 2 per cent.

Guinness was Mr Buffett's first significant overseas investment. He built a renowned reputation, covering more than 35 years, buying and selling US shares, experiencing some outstanding successes. A big stake in Coca-Cola was regarded as his biggest coup.

Since he arrived on the Guinness share register the drinks group, after a heady run, has experienced some sobering times.

There has been a dramatic slowdown at the luxury end of the drinks market where Guinness has reigned supreme. Its French associate, LVMH, has also felt the whip of the world recession. And earlier this month Guinness disclosed a pounds 125m hit from a reorganisation of its Scotch whisky and Spanish beer operations.

The latest Guinness discomfort occurred as the stockbroker Shaw & Co said the shares should be a core holding 'in any private client portfolio'. The suggested buying price was 471p.

The rest of the stock market had a busy but uninspired session. The FT-SE index ended 15.6 points lower at 2,816.9. Even the second string FT-SE 250 index gave ground.

But in brisk trading turnover reached 828.9 million shares, the second-highest this year. Once again the bulk of the activity occurred outside the top 100 shares.

The Asda and Stakis rights issues were happily absorbed but aroused fears that further cash calls were on the way.

Asda, which is set to return to the FT-SE 100 index once the pounds 347m rights goes through, rose 4.75p to 67.75p. Stakis, raising pounds 28m, improved 4p to 45p.

British Steel shrugged off the US dumping moves. Its US volume is said to be small. The shares, helped by transatlantic buying, rose 2.5p to 71.5p.

Most tobacco shares were under the whip of the passive smoking judgment. BAT Industries fell 12p to 975p and Rothmans International 16p to 612p. But Hanson (Players and Wills) put on 1.5p to 246p.

British Petroleum dipped 4p to 237.5p on rights fears and the deteriorating outlook for the oil industry. Lasmo, following the sudden departure of its chief executive, Chris Greentree, fell 8p to 155p. The decline would, as dividend worries reared, have been steeper if rumours of a British Gas bid had not resurfaced. BG fell 5.5p to 284.5p.

Trafalgar House, down 2.5p to 96.5p, was ruffled by rights rumours; so was Royal Insurance, off 9p to 276p.

The US health scare continued to worry Vodafone, the mobile telephone group, down 12p to 375p.

Watson & Philip, the food retailer and wholesaler, jumped 30p to 333p on its pounds 21m takeover of the Circle K convenience stores chain.

Frogmore Estates improved 11p to 310p as a large line of stock, about 4 per cent of the company, went through. But City Site Estates, down 11p to 13p, was devastated by dramatically increased losses. Berkeley Group, the house builder, put on a further 10p to 351p following the Soros stake.

BM Group, the engineer, had a difficult session as tales of poor trading circulated. The shares fell 10p to 50p, a 1992/3 low. They touched 417p before the chief executive, Roger Shute, resigned for health reasons last year.

Prism Leisure, the video games group, jumped 12p to 75p. Interim profits increased from pounds 374,000 to pounds 478,000, prompting the stockbroker Beeson Gregory to increase its year's forecast from pounds 1.1m to pounds 1.3m.

The packaging group Britton put on 1.5p to 11.75p, reflecting an analysts' visit.

In busy trading shares gave further ground. The FT-SE 100 index ended 15.6 points down at 2,816.9. At one time it was up 3.5p. The FT-SE 250 index was lowered one point to 2,963.5. Volume reached 828.9 million shares with 35,017 bargains. Government stocks advanced by up to half a point.

Armour Trust, the car accessory and confectionery group, edged ahead 0.5p to 38p as a line of 1 million shares (about 3.7 per cent) went through. There was immediate speculation Grand Central Investment Holdings, a Far Eastern group with sweet interests, had snapped up the shares. It already has 20 per cent and has appeared willing to buy any big lines on offer.

The property group Waterglade International, after a torrid time, seems on the mend. In the year to last March losses more than tripled to pounds 18.5m. But the worst problems have been sorted out and it seems prepared to expand by taking advantage of the depressed property market and is looking for single properties and property groups. The shares are 6p.