Market Report: Fading bid talk puts Sainsbury's on cut-price shelf

SAINSBURY'S LED a retailers' retreat yesterday as renewed talk of a sale of the family stake and fading bid speculation combined to put the shares on the cut-price shelf.

The supermarket where "good food costs less" was one of the biggest casualties in a loss-making FTSE 100, checking out a 20.25p loss to 380.5p.

The whisper is that the founding dynasty is planning to reduce its near 40 per cent holding in the group.

The idea that a sizeable chunk of Sainsbury's shares could be dumped on the market in the near future unnerved dealers. Some pointed out that a sudden surge in the quantity of stock available would almost certainly depress the price.

Cooler heads, however, noted that the Sainsburys' stake is held in several separate trusts and would probably be sold in different stages, reducing the risk of a stock flood.

Sainsbury's misery was compounded by news that the US giant Wal-Mart is reluctant to bid for a UK rival. The cold feet of the Yankee retail powerhouse caused a slump in many of its potential targets.

The hot tip Asda gave up 5p to 203p as the merger with Kingfisher, 9.5p off at 912p, moved a step closer. The second favourite Safeway dropped 5.75p to 253p, while Tesco lost 9.25p to 177.5p. Its rumoured partner Marks & Spencer shed 19.25p to 430p. A "neutral" recommendation from house broker Merrill Lynch and a 325p price target from WestLB Panmure did not help. Booker, another alleged Wal-Mart objective, fell 2.5p to 73p.

The FTSE 100 was hit by a bout of profit-taking as investors locked in gains after the recent record-breaking run. The blue-chip index shrugged off the Dow's strength and plummeted 101.2 points to 6,497.6.

By comparison, the second liners had a triumphant session, with the FTSE 250 closing 2.9 at 5,816.6 and the Small Cap rising 9.4 to 2,557.7.

The theme of the day was the switch from growth stocks into cyclical stocks. The rotation left pharmaceuticals, a traditional growth sector, looking sickly.

Glaxo Wellcome bled 85p to 1,843p as investors followed their US peers and abandoned the drugmakers. Glaxo was also affected by vague rumours that today's mega-presentation to analysts will produce a bearish view of some Aids drugs.

AstraZeneca, down 100p to 2,410p, and SmithKline Beecham, 25p lower at 815.5p, completed the pharma rout.

Cyclicals such as mining and oil stocks benefitted from the drug-peddlers' misery. Billiton shot to the top of the FTSE 100 risers' chart with a 16.75p advance to 206.75p, while Rio Tinto dug up a 49p rise to a 12-month peak of 1,075p.

BG was another cyclical in demand, rising 9p to 355.75p. Fellow utility Powergen lost 9.5p to 695.5p ahead of today's deadline for the sale of two big power stations. The buyer is likely to be a US energy giant.

Arch-rival National Power fell 10.25p to 486.5p. It remains a tasty bid target after the departure of its chief executive.

Shell flared 7p higher to 461.25p thanks to the better oil price and on-going talk of a merger with Elf, while BP Amoco rose 9.5p to 1,169.5p in sympathy.

The publisher Reed rose 19.5p to 562p, on renewed whispers of a strike by Dutch rival Wolvert Kluivert. United News & Media soared 47p to 720p after the pounds 920m purchase of a US hi-tech publisher.

BAT puffed 39p higher to 544p as brokers shrugged off declining profits and looked ahead to a positive 1999.

The demerger candidate Allied Domecq was the worst-performing blue-chip, shedding 31p to 478.5p. Analysts described interim results as "dismal".

Unilever slipped 33.5p to 559.5p on worries over the 1999 outlook.

Bids were the talk of the town among the undercards. The condom-maker London International Group (LIG) rose 8p to 178.5p on talk that the healthcare group Seton Scholl, 14p lower at 751p, or the Australian giant Pacific Dunlop, could mount a 225p-per-share strike.

FI, the computer services group, notched a 15p rise to 327.5p amid vague talk of interest from EDS, the US behemoth.

The oil explorer British Borneo rose 10p to 174.5p. A big find or a bid should be near.

Airtours travelled 27p lower to 431p after the much-expected 229p-per- share for First Choice, up 7.5p to 200.5p. The derailment of First Choice's merger with its Swiss peer Kuoni could spark a costly counterbid or a price war from market leader Thomson, down 24p to 130.5p.

Travis Perkins built a 46p advance to a five-year high of 652.5p after buying the rival builders' merchant Keyline.

The builder Linden soared 14p to 246.5p after confirming that it had received planning permission for a retail and housing development in Surrey.

Rival Alfred McAlpine rejected a 215.2p per share offer and rose 37.5p to 230p. The bidder, believed to be a financial group or a US company, is expected to come back with an increased offer.

A de Gruchy, "the Harrods of Jersey", rose 60p to 285p on news that the perfume retailer Merchant could buy the 72 per cent it does not already own for 300p per share in cash.

Albermarle & Bond, the pawnbroker, exchanged a profits warning with a 11p fall to 45p.

SEAQ VOLUME: 1.1BN

SEAQ TRADES: 77,697

GILTS INDEX: 110.54 +0.45

THE BID battle for CALA could descend into open warfare in the next few weeks. The Scottish housebuilder and property developer has received a pounds 82m, 175p-per-share, offer from the privately-owned rival Miller. However, a management buyout team is rumoured to be considering a counterbid north of 190p, which could force Miller to go well above 200p to win the day. The shares were unchanged at 182.5p yesterday.

BELL GROUP, a maker of electronic security systems, yesterday moved a step closer to entering the uncharmed circle of small cap companies with plans for a pounds 62.7m float.

The group placed more than 21m shares at 120p each and is expected to start dealing on Thursday. Bell, which last year posted a pounds 3.8m profit on turnover of pounds 34.1m, designs security and fire protection systems for several blue-chip companies.