Market Report: Buyers jump on Arriva as rumours arrive in threes

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The Independent Online
BUYERS HOPPED on the bus group Arriva yesterday as rumours of takeover, acquisitions and disposals alighted on the stock. The cocktail of whispers pushed the shares 21p ahead to 330p - one the biggest jumps in a rising FTSE 250.

It was a performance typical of London buses - you wait ages for a rumour and then three come along at once. The more intriguing whisper talked of an overseas interest in the underperforming Arriva.

Well-informed traders are convinced a European giant could take advantage of Arriva's recent weakness to launch a strike. Conditions for a bid are quite favourable. Over the past 12 months the UK company's price has underperformed the market by about 40 per cent and the transport sector by 30 per cent.

However, its business remains sound, with bus franchises scattered around the country and a chain of car dealers. It would be a juicy acquisition for a continental group wishing to enter the UK market.

The second whisper suggested that Arriva might be preparing to sell its car dealerships. After the recent disposal of its car leasing business for pounds 520m, the dealerships stand out like a sore thumb among Arriva's bus interests. Chief executive Bob Davies has repeatedly said that there are no plans for a sell-off. However, market players believe he would sell at the right price and use the proceeds to expand in Europe.

The last whisper to excite Arriva watchers was the long-rumoured bid for a rail franchise - a move which would expand the company's transport interests.

The overall market motored ahead steadily even though nerves remain frayed ahead of the US interest-rate decision on 5 October. The FTSE 100 rebounded with a 55.8-point rise to 5,969.7, thanks to corporate excitement among telecoms heavyweights.

The blue-chip index even climbed above the important 6,000 level at lunchtime thanks to a positive CBI survey. However, the rally petered out in late afternoon as Wall Street started wobbly. The second-liners were trailing the leaders, with the FTSE 250 closing 15.5 higher at 5,738.3 and the Small Cap edging 3.7 up to 2,714.8.

Phone groups rang up strong gains on hopes of a bid for the telecoms operations of Mannesmann. The German conglomerate triggered the speculation when it announced the demerger of its portfolio of Italian and German telephone companies from its engineering and car interests.

London dealers said Vodafone AirTouch, 76p higher at an all-time high of 1,418p, could bid for Mannesmann's telecoms business. The two are already partners in the German mobile operator D2 and a full-blown bid is not impossible.

Orange, 58p better to a record 1,154p, Colt Telecom, up 53p to 1,298p, Energis, 65p up to 1,419p, and Cable & Wireless, 15p higher to 681p after unveiling a Singapore Web venture, are also seen as targets in the consolidation of the global phone industry. By contrast BT, 39.5p better at 961p, is seen as a possible bidder for UK or overseas assets.

Dixons led the retailers' bounce, rising 69p to 1,054p after long-term bear Charterhouse upgraded. However, the stock lost some gains in late trading amid concerns over the valuation of its Internet offshoot Freeserve (results next week). The provider launched a service to route e-mails to pagers but closed a mere 2p higher at 138p after having flirted with the 150p float price for part of the day.

Sector peer Kingfisher jumped 27.5p to 641p after broker Warburg went bullish, while Debenhams firmed 23p to 317p on bargain hunting. The retailers' black sheep were again Marks & Spencer, 2.25p lower at 310p despite poaching its marketing director from Kingfisher, and Storehouse, down 5.5p to another low of 86p on continuing talk of a profit warning.

Hong Kong bank Standard Chartered soared 57.5p to 824p on whispers that Salomon Smith Barney had upgraded its stance, while bid rumours continued to support Bank of Scotland, 11p higher at 706.5p.

Reuters was said to have told US analysts that its brokerage arm Instinet is not doing well and plummeted 127.5p to 726p. Legal threats sent Imperial Tobacco 43.5p lower to 700.5p, while Glaxo Wellcome closed unchanged at 1,591p despite confirming a shake-up of its manufacturing operations.

Glass-maker Pilkington firmed 2p to 110.75p on huge volume of over 33 million shares. There is talk that the recent rise in glass prices will be reflected in Monday's trading statement. Racier dealers said the real reason for the volume was a whisper the management has found the money to take Pilks private.

Bid rumour returned to United Assurance, 10p higher to 385p. Hotels group Greenalls was 13.75p better at 314.75p after some roguish trades. Vague takeover talk pushed paper group Arjo Wiggins 14.5p higher to 194.5p, while plasterboard maker BPB put on a solid 34.5p to 373.75p as a bullish trading statement triggered upgrades. Engineer Mc-Kechnie slipped 36p to 441.5p on vague whispers of a profit warning, while aerospace equipment maker Meggitt nosedived 9.5p to 180.5p.

Prefab buildings maker AAF Industries climbed 23.5p to 115p after receiving a 120p-a-share cash bid from South African rival Waco, its largest shareholder.

Break for the Border, the Australian bar operator, poured 7.5p higher to 43.5p despite rejecting a 45p-per-share bid from Thomas Read, a privately- owned Irish hotels group.

Medical equipment group Axis Shield fell 2.5p to 392.5p despite talk of a deal with German group Bayer for two of its star products. Stent maker Biocompatibles surged 9.5p higher to 155p on whispers of a bid, possibly from US group Boston Scientific or Guidant. Geo Interactive Media rose 6p to 139.5p on hopes of a deal for its radio-on-the-Web device.

Bra maker Sherwood, 5.5p lower at 18.5p, came undone after a profit warning, just like car dealer HR Owen, 24.5p down to 139p.

SEAQ VOLUME: 1.29bn

SEAQ TRADES: 77,990

GILTS INDEX: 192.02 -1.01

THE INFORMATION provider DRS Data rose 3p to 22.75p yesterday amid talk of a major contract win. Some punters are speculating that a government department could soon sign up DRS as one of its data providers. The Education Department is a prime suspect, given DRS's track-record in supplying data to schools. A large contract could ensure a return to the black for loss making

DRS.

POSITIVE rumours are buzzing round loudspeaker group NXT. The stock surged 24p to 456.5p yesterday amid talk that the final results, due on 8 October, will provide some pleasant surprises.

The maker of electronic equipment has signed a swathe of licensees for its Mission loudspeakers in the past few months in a bid to boost sales. The deals could help the company to beat current market forecasts of a loss of about pounds 8.78m .

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