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Market Report: Hectic trading in Rentokil amid takeover rumours

HAS Rentokil Initial put the Compass contract catering group back on its takeover menu?

The stock market appears to think so. There was some hectic trading in Rentokil shares, with the price shading 1.5p to 415.5p. Compass firmed 4p to 1,185p.

Sir Clive Thompson, the Rentokil chief, has made no secret of his taste for Compass. He has admitted it is one of three companies he has examined. The others are a Danish group and the Securicor mobile telephone and security group.

But the Danish business and Securicor, with its deep-rooted involvement with BT, could provide the environmental group with unwanted difficulties. On the other hand Compass, like Rentokil's last take over of BET, would represent a straightforward appeal to shareholders.

Compass, which is trading well, would represent a logical extension of Rentokil's sprawling service operations. Capitalised at pounds 3.9bn, it would be no more than a tantalising swallow for the highly acquisitive pounds 12bn group, which was not afraid to engage in a hostile bid for BET.

Another big deal - and on past form one is due - from Sir Clive would help to reduce the impact of the 32.2 per cent stake held by Ratin, the Danish group. It said it is unlikely to retain its interest after its standstill agreement runs out in 2001.

The rest of the market remained weighed down by overseas considerations. Footsie, after an early 35.4 points surge, ended 7.9 lower at 5,862.3. But the mid cap index displayed its independence with a 17.7 gain to 5,898.5. The small cap index fell 3.6 to 2,769.6.

Hillsdown Holdings, as Unigate's interest was duly confirmed, rose 8p to 206.5p with Unigate 16p off at 636.5p. The bid is 217p, pricing Hillsdown at pounds 1.58bn. Some wonder whether a Dutch group will attempt to barge into the talks.

Asda slipped 2.25p to 183p on talk that it is about to fix a trading alliance with Kingfisher, up 22p to 1,105p. Kingfisher is due to take analysts to see its Darty electrical retailing operation in France next month.

J Sainsbury improved 3.25p to 488.75p with SBC Warburg talking of a 600p target, and ABN Amro suggested United Biscuits, off 4.25p to 271.75p, was undervalued.

Halifax, hitherto riding high on merger talk and its inclusion in the important Morgan Stanley international share index, came crashing to earth after ABN, worrying about the competition mortgage banks face, said sell. The shares fell 27p to 896p with Woolwich off 11p to 342.5p.

British Aerospace climbed 17p to 519p on more positive indications about corporate developments at Airbus Industrie, where it has, in effect, a 20 per cent stake.

The Falkland Islands gusher came, at least for the time being, to a dismal end. Amerada Hess's decision to abandon an oil well in the South Atlantic sent the island threesome crashing. Desire Petroleum lost 117.5p to 260p, Greenwich Resources 7.25p to 28.5p and Westmount 45p to 182.5p. Lasmo, which will lead the exploration of the field involving the trio, was off 1p at 294.5p.

Recent newcomer AB Airlines rose 9p to 114p, seemingly on the clearance of a stock overhang, and Northern Leisure, the disco chain, fell 16.5p to 515p on a one-for-one bonus.

Vosper Thorneycroft, the shipbuilder where takeover gossip is in the air, held at 855p. A fund managers' visit had little impact; Panmure Gordon put a 1,050p target on the shares.

PhoneLink was suspended at 47.5p, down 7.5p. It transpires one of its proposed acquisitions does in fact amount to a reverse takeover. The rumour of a merger with its Dutch associate was not so wide of the mark. The company said it was in talks which could lead to acquisitions related to Raggeborgh Participaties, which holds 165.6 per cent of PhoneLink.

Internet Technology surged 29.5p to 166p after its joint venture partner, Wave Systems, said it had reached a licence agreement with leading component maker Standard MicroSystems. House broker Warburg lifted its target from 120p to 200p. The shares were 38.5p in February.

Newcomer City North, a property group, closed at 158.5p against a 145p placing.

On the building pitch Beazer attracted interest on talk of a bid from another housebuilder. The shares rose 7p to 220p in busy trading. At the turn of the year they were 155p.

Powerscreen, the engineer, remained depressed after the plunge into losses. The shares fell 13p to 97.5p. The Stock Exchange is probing a big share trade on Friday.