Market Report: Energis rings up new high on takeover talk
Tuesday 02 November 1999
Well-connected traders said that Energis looks more and more like a sitting duck in the fast-changing world of global communications.
The dealing room's sages argued that Energis is a victim of its own success. Its strategy of targeting lucrative business customers with innovative telecom services has paid off and the shares have more than doubled over the past year.
The potential for a roll-out of Energis' business model in Europe and the US has apparently not gone unnoticed. According to the whispers, Continental and American phone giants are having a close look at the company.
Among potential European predators, Deutsche Telekom and France Telecom were seen as front-runners, while Bell Atlantic was the favourite US choice. Another school of thought talked of a merger between Energis and Dutch- based rival Equant, which also specialises in business users.
Equant has been linked to Colt Telecom, up 28p to a record 1,847p, and a three-way deal between Energis, Equant and Colt is not impossible.
Any bidder for Energis will have to persuade the electricity group National Grid, 3.5p lower to 451p, to sell its 46-per-cent-plus stake, but the market is convinced the Grid will dump the holding if the price is right.
The rest of the sector was boosted by a Salomon Smith Barney's upgrade. The broker believes that telecoms and financials will lead a market rally at the dawn of the New Millennium.
Salomon's thoughts propelled Vodafone Airtouch 17p higher to 300p in large volume. The end of last week's selling wave - which was linked to a bond issue to pay for a Eastern European acquisition - also helped.
However, Orange, 37p down at 1,480p, was left out of the party after a big share placing. Broker DKB was said to have placed some 5 million shares in the group on behalf of an institution. The stock was sold at a cut-price 1,477p and depressed Orange's price for the rest of the session. The mystery shareholder was thought to want to sell in the market rather than accept the cash and share offer from Orange's German suitor Mannesmann.
The rest of the market had a lacklustre session as many big players sat tight ahead of Thursday's interest-rate decision.
The FTSE 100 finished 28.3 higher at 6,284 thanks to a welter of bid talk and a good start in the Dow. The US index opened higher, dispelling fears that the inclusion of computer giants Microsoft and Intel could strain the Yankee dealers' nerves. A positive US economic survey also helped Wall Street sentiment. The undercard followed the leaders, with the FTSE 250 ending 21.6 better at 5643.9 and the SmallCap rising 3.4 to 2639.2.
Building materials groups were solid as cement as bids, real and imagined, swept through the sector.
Old bid chestnut Rugby, unchanged at 114p, finally unveiled a takeover approach, just days after some directors bought shares. The list of mooted bidders was headed by Irish giant CRH, up 0.1 euros at 18.06 euros, followed by RMC, 3p lower at 872p and French group Lafarge. Dealers said initial offers were likely to be pitched around 125p-135p.
Mining group Anglo American, 6p lower at 3,250p, could also have a go at Rugby after Tarmac, 24p down to 488p, spurned its 550p-per-share offer. Alternative targets include Caradon, 9.5p better at 153.5p, Hepworth 11p higher at 197p and Aggregate Industries, 3.75p up to 67.5p. Cement giant Blue Circle, 16.75p better at 299.25p is also a mooted consolidator.
Outside the bricks and mortar sector, bid talk sent hotel and betting group Hilton 7.25p up to 192.75p, and information giant Reuters 14.5p higher to 580p. Railtrack steamed 41p to 1,273p on whispers that it will not have to slash the dividend to pay for safety improvements, while National Power surged 13.25p to 424.5p as talk of a spin-off of its international division resurfaced.
Defence group British Aerospace flew 3.75p higher to 359.25p on renewed whispers of a deal with US rival Lockheed Martin and talk of a large contract win.
Brewers Whitbread, 17p lower to a 12-month low of 648p, Scottish & Newcastle, 14.5p down to 552.5p, and South African Breweries, 18.5p worse to 521.5p, were knocked out by talk of bearish sales
In the midcap, engineer Tomkins rose 11.25p to 217.5p as the spin-off of its bread division nears. AIM-listed Bakery Services baked 4.5p, or 138 per cent, higher to 7.75p after the chief executive talked of a major deal on a TV programme but said nothing to the Stock Exchange. Retailer House of Fraser firmed 1.5p to 68p on whispers of a break-up bid by a private equity group.
Hopes of a large find in the Falkland Islands sent Desire Petroleum 7p higher to 26.5p, while cash shell Cambury Investments rose 1p to 4.25p, despite rejecting all-share offer from Artisan, 0.75p better at 8.5p, the acquisition vehicle of entrepreneur Stephen Dean. Other bidders could now enter the fray. AIM-listed Magnum Power buzzed 2.75p higher to a yearly peak of 23.5p on whispers of a contract with a US computer giant, while e-commerce group Infobank surged 29p to a record 251.5p on talk of an imminent second listing on Germany's Neuer Markt.
SEAQ VOLUME: 991.2M
SEAQ TRADES: 88,753
GILTS INDEX: 105.49 +0.09
SHAREHOLDERS in the recruitment services struggler Lorien may be in for a reprieve. The provider of software for training and customer management firmed 2.5p to 87.5p yesterday amid bid talk. Insiders believe the slump in Lorien's shares from their March peak of 219p has triggered the interest of a rival. Others argued that the stock's undeperformance might have convinced Lorien's management to take the company private.
KEEP AN eye on Baron Corporation, flat at 120p. The AIM-listed minnow, chaired by entrepreneur Bob Morton, is thought to be close to deals for its unique software programme which allows golfers to book tee times on the net.
A small acquisition, in the UK or Ireland, is also on the cards.
There is also talk that Mr Morton could increase his stake of around 5 per cent.
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