Market Report: Investors pile on to merger bandwagon

TAKEOVER MANIA returned to boost Footsie. The blue-chip index jumped 113.7 points to 6,252.9 as investors piled on to the speculative bandwagon.

BP Amoco, Glaxo Wellcome and Reed International were the giants setting the pace. Among the second liners Safeway, the supermarket chain, and Storehouse, the BhS group, were singled out for bid attention.

The prospect of BP Amoco, Footsie's biggest company, getting even bigger by taking over Los Angeles-based Atlantic Richfield (Arco) for pounds 16bn sent the shares gushing 40p to a new 1,077p peak.

With Arco in tow, BP would represent an even more daunting challenge to fund managers than it does at the moment. After the Amoco merger it accounted for approaching 9 per cent of Footsie. If Arco is bedded in its involvement will be about 11 per cent. With many fund managers yet to adjust fully for the Amoco merger they will be disturbingly underweight in the all-powerful oil group.

Other oil shares responded to the BP initiative, with Shell, on hopes it could be stirred into merger action, rising by 12.25p to 423.25p. With the crude oil price at a five-month high Enterprise Oil, still talking merger with Lasmo, flared 8p to 353p; Lasmo gained 3.75p to 135.5p.

Glaxo was on a high, adding 83p to 1,979p. It has again shown its desire to grow by holding merger talks with the US group, Bristol Myers Squibb. The negotiations did not get very far, but they underlined market suspicion that it will not be long before Glaxo entices a drug rival. Smith-Kline Beecham, still regarded as a merger possibility, put on 32.5p to 855.5p.

Publisher Reed International gained 21p to 540.5p following reports that Wolters Kluwer was stalking the Anglo-Dutch group with a possible pounds 15bn offer.

With so many heavyweights in demand, Footsie moved steadily ahead for much of the day. A strong New York was another bullish influence, helping overcome worries about the Balkan crisis. More evidence that interest rates should be cut further and the usual jockeying ahead of the end of the trading quarter and tax year contributed to the Easter parade.

Supporting shares also edged into positive territory, but most of the attention was directed at Footsie.

Still, Safeway jumped 15.75p to 253.75p. Some suggested that it was merely oversold, but the surge in trading indicated hopes of corporate action. Asda is known to have looked and walked away, and it is possible that the group's charms could attract an overseas predator, such as Wal-Mart or Royal Ahold.

The Safeway move could, in part, have been inspired by Credit Lyonnais' buy advice. The investment house said the shares had fallen to "ludicrous levels".

Storehouse also drew strength from the oversold argument, but the 11p gain to 136.5p was also due to talk of a US strike. The retailer denied it had received a bid approach.

Imperial Chemical Industries topped the Footsie leader board on hopes its disposal programme was at last coming together and sales worth pounds 2bn were near. BT, on expectations of a Cellnet deal, was back above 1,000p at 1,014p, and talk of bank action pushed Lloyds TSB 43.5p higher to 943p.

P&O, after last week's progress, ran out of steam, slipping 38p to 913.5p, and Ladbroke lost ground after BT Alex.Brown took the shares off its buy list; they gave up 7.5p to 288.75p. Billiton, the resources group, eased 8p to 145p after analysts returned from South America, and Railtrack reversed 21p to 1,455p on funding worries. Great Universal Stores fell 28p to 690p; it was believed that Cazenove cut its profit forecast from pounds 518m to pounds 502m. Last year GUS achieved pounds 623.7m.

Among the second liners London International, the condom maker, gained 11p to 155.5p after it became apparent that takeover talks were still going on. Glass maker Pilkington rose 3p to 75p on persistent bid talk.

Century Inns frothed up 26.5p to 141.5p as Enterprise Inns duly rolled out its 150p-a-share bid and, illustrating shareholder power, quickly won control. Inn Business, another in Enterprise's sights, fell 5p to 66.5p. Pubs 'n' Bars, in reverse takeover talks, rose 5.5p to 43p.

Cleveland Trust, a property group, added 7.5p to 115p as the Ashtenne property group emerged as the most likely bidder.

Sema, the computer group, shaded to 738.5p on its return to Footsie following the removal of LucasVarity, and Photo-Me International snapped 30p higher to 535p on its mid cap debut. Ultraframe, also a mid cap recruit, firmed to 402.5p.

French Connection rose 105p to 485p following results, and Arlen, the electrical group, scored the day's best gain, 34.5 per cent to 26.25p, as asset sales and a corporate revamp edged nearer.

Signet, the jeweller, twinkled 1.5p up to 47.75p after it became known that it faced resolutions from 6 per cent of shareholders to sell its US operations or at least float a 20 per cent interest in its trans-atlantic jewellery chain.

Sandtracs, the hi-fi group, continued to benefit from last week's upbeat trading statement, hitting a 12-month peak with a 13p gain to 81.5p. BGR, the restaurant group, served up a 26.5p gain to 180p following encouraging trading comments. Clubhaus, the golf group expected to tee up profits 90 per cent higher at pounds 6.7m today, advanced 8p to 64.5p.

NMT, the disposable syringe maker, gained another 9.5p to 136.5p. The shares have surged upwards from 70p last week after the company announced its plans to raise pounds 15.3m.

SEAQ VOLUME: 982.2m

SEAQ TRADES: 90,957

GILTS INDEX: 113.41 +1.00

BEECHCROFT held at 2.25p, a year's high, after reporting 14-month profits of pounds 542,000, a 67 per cent increase on the previous 12 months. It builds upmarket retirement homes with a starting price of pounds 175,000.

Profits this year could hit pounds 850,000, helped by developments at Henley- on-Thames and at Lechlade, also on the river. The dividend is 0.08p against 0.05p. The shares have been up to 4p.

COUNTRYWIDE Assured, the estate agent, rose 5p to 140.5p; earlier this month the group reported profits down from pounds 54.8m to pounds 43.3m, but said trading in its first two months had been "very encouraging".

With the housing market improving the former Hambro Countrywide, capitalised at near pounds 500m, could be on a roll and there is talk that it could attract a predator. The shares were 24p three years ago.