Market Report: Cadbury Schweppes sweetens a drab day

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The Independent Online
CADBURY SCHWEPPES put a bit of fizz back into a tired market yesterday as talk of corporate action swirled around the chocolate and soft drinks group. Traders with a sweet tooth gobbled up the stock in the hope of a major deal with a foreign rival. The somewhat wild rumour left Cadbury 23.25p higher at 425.75p in a falling market.

Traders said their appetite for the food group had been wetted by a couple of heavyweight buyers who chased the shares higher for most of the day. The market believes there is no smoke without fire and immediately started talking of a mega-merger.

According to the whispers, Cadbury's recent disposal of its non-US soft drinks business to Coca-Cola - set to be completed by the third quarter of this year - will leave the group with a focused portfolio of brands which could attract an overseas competitor. The list of possible partners was long but the US chocolate group Hershey and even the Swiss giant Nestle were two tasty possibilities.

The other, more boring, reasons for Cadbury's rise was the arrival of interim results next week and the European Commission's raid into Coca- Cola's offices. Some traders pointed out that a prolonged European probe into Coke could encourage investors to switch into some of its rivals.

The Coke bottler Coca-Cola Beverages was the day's worst midcapper, pouring 10p lower to 119.5p after the investigators' visit. Bears fear that further falls could force CCB to renegotiate the terms of its all-share merger with its Greek rival Hellenic.

The other big rumour of the day centred on the fund manager Singer & Friedlander. The owner of broker Collins Stewart surged 7.5p to 151.5p in unusually-high volume of 6.1m shares on talk that a larger rival is lining up a bid. Some believe a French or German player could be interested.

However, a UK house such as Close Brothers, down 2.5p to 791.5p, may also have a go after Wednesday's bid for Rea Brothers. Rea closed unchanged at 97.5p after some arbitrage buying. Fellow fund manager Johnson Fry, unchanged at 182.5p, is also a target.

The overall market had another drab day, with the FTSE 100 ending 32 lower to 6,297.8 - its lowest point since June. The trigger for the blue- chip index's fifth consecutive fall were some hawkish words from Alan Greenspan in the all-important Humphrey-Hawkins testimony. The US Federal Reserve chairman warned that a "euphoric" rise in share prices could push US equities to "insupportable" levels. Bond markets were also on the slide, hit by Mr Greenspan's bearish words on inflation.

The smaller indexes could not resist the selling pressure and the FTSE 250 ended 11.7 down at 6,021.8, while the Small Cap dropped 4.8 to 2,730.6.

The media sector was excited by deals and regulatory reviews. Granada soared 50.5p to 674p on confirmation of The Independent's story that it was to sell its 4 per cent stake in BSkyB, up 5p to 555.5p, to the French conglomerate Vivendi. Pearson, 8p higher at 1238p, sold a similar amount, leaving the Gallic group with 24.5 per cent. A merger between Rupert Murdoch's satellite TV and the Vivendi-controlled Canal + is now more than pie in the sky.

Granada was also spurred by news that the Office of Fair Trading could allow operators to own more than 25 per cent of the ITV advertising markets. Rival Carlton jumped 10.5p to 529p on hopes of ITV consolidation, while United News & Media rose 14p to 640.5p amid whispers it might sell its Anglia, Meridian and HTV franchises.

The media bid frenzy was completed by talk that the Sky-less Granada could bid for Scottish Media Group, up 10p to 925p, and rumours that Scottish Radio, 27.5p higher to a best ever 1012.5p, could be bought by a bigger competitor.

Revived talk of a bid lifted EMI 27p to 550p, while Norwich Union put on 14.75p to 426.75p on good figures from Legal & General and persistent takeover speculation. However, profit-taking pushed L&G 2.25p easier at 152.5p in massive turnover of 45m shares.

Outside the bid zone, ICI climbed 52.5p to 732.5p after surprising the market with better-than-expected figures, while Boots moved 40p better to 801p thanks to an upbeat AGM statement. Software group Misys shed 60.5p to 560.25p despite strong interims on fears of a millennium-driven slowdown in orders, while Northern Rock fell 7.5p to 456p after lukewarm results.

Rolls-Royce firmed 3.5p to 272.5p amid hopes of a Boeing engine deal, but the US aircraft giant does not want to change its contract with General Electric. Cable & Wireless rose 4p to 797.5p after ABN Amro said its global phone business is worth an extra 185p.

In the Mid Cap, the old bid chestnut DS Smith, the paper firm, wrapped up a 7p rise to 171.5p on talk of a bid, possibly from venture capitalists or overseas rivals. Rival Arjo Wiggins, 6p better at 229.5p, was also in the takeover frame.

Northern Foods digested a 6p jump to 135p after a bullish trading update, just like the waste group Shanks & McEwan - it rose 4.5p to 244p.

Retailers delivered a trolleyful of bid whispers. Convenience store group Alldays rose 8p to 85.5p on bid talk. Sainsbury's, down 7.5p to 378p, could be interested although, GUS, 7p lower to 689.5p, or Budgens, up 1.25p to 74p, look more likely to strike. Storehouse firmed 0.5p to 129p as talk of a bid persisted, while Safeway dropped 1.25p to 232.75p despite continuing whispers of a strike from Kingfisher or a foreign rival.

Its near name-sake Kingfisher Leisure, the disco group, danced 37.5p higher to 175p on talk of a bid from Luminar, up 12.5p to 933p, while chip-maker Videologic buzzed 4p higher to 65p on rumours of a large contract win. Jarvis Hotels firmed 1p to 151.5p on talk of a tie-up with French group Accor.

Bid target WF Electrical slumped 77.5p to 407.5p after poor results, while cash shell General Industries debuted on AIM with a 17.5p rise to 47.5p. It is looking at deals with on-line bookies, travel firms and schools.

SEAQ VOLUME: 1.1BN

SEAQ TRADES: 81,344

GILTS INDEX: 106.56 -0.20

THE BUILDING materials minnow PTS could be close to receiving an offer from a larger rival. The supplier of plumbing and heating equipment to builders merchants jumped 12p to an all-time high of 192p.

Insiders said that an offer north of 200p per share could soon appear. Larger rival SIG was mooted as a predator, even though its shares jumped 19p to a yearly record of 235p on rumours that it might be bought itself.

STENTOR, the AIM-listed Irish telecom provider, rang up a 7p rise to 40p yesterday in pretty good volume.

The unusual rise prompted the company to say that it "knows of no reason" for the movement. Luckilly, some punters were at hand to shed some light on the mystery. According to the rumours, Stentor is close to signing a major deal with a large telecom group which could give a huge push to its depressed share price.

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