Market Report: Kingfisher takes flight on talk of European buy

IS KINGFISHER ready to hit the acquisition trail in Europe? As dealers focused on the bid rumours surrounding insurer Legal & General, the owner of B&Q and Woolworths rose almost unnoticed, closing 18.5p higher at 751.5p.

The rise was no mean feat in a crumbling market and traders reported some good buying interest amid talk that Kingfisher is set to pounce on a European electrical or DIY group.

Since being defeated by US giant Wal-Mart in the race for supermarket group Asda, Kingfisher's chief executive, Sir Geoff Mulcahy, has been known to favour a foreign acquisition.

Well-connected dealers muttered that one of Sir Geoff's preferred locations is France, where the group owns the electrical retailer Darty and has a tie-up with DIY chain Castorama. The Gaellic retail sector is in a state of flux following the mega-merger of Promodes and Carrefour and les acquisitif rosbifs will probably find plenty of medium-sized groups to acquire.

Other mooted territories for Sir Geoff's conquests are Spain, where Kingfisher has no presence, or Germany, a long-time target.

Die-hard fans of a UK merger rehashed talk of a bid for Safeway, up 2.5p to 261p, or Sainsbury's, up 2.25p to 432.75p, but the European option was the hotter tip. A related rumour suggested Sainsbury's could be on Dutch giant Ahold's shopping list.

Sector peer Iceland rose a cool 4p to 288.5p on vague whispers of a deal ahead of next week's results.

The rest of the market was in no mood for shopping and put a huge "for sale" sign on its window. The FTSE 100 plunged 80.6 to 6,195.6, dragged down by a hefty 200-point opening fall in the Dow. The US index fretted about today's employment numbers with economists saying that any fall in unemployment below 4.2 per cent would probably trigger a tightening by the Federal Reserve.

The undercard was having none of this and outperformed the big boys thanks to positive interim results and bid speculation. The FTSE 250 closed 4 higher at 6,069.9 within 20 points of its all-time peak reached on 19 July. The Small Cap finished 3.8 better at 2,825.1 - another record high.

There were no prizes for the strongest rumour of the day: Legal & General to be taken over by a UK bank. L&G soared more than 10 per cent, settling 17.5p higher at 192.25p. The tell-tale sign that something was afoot was the volume - a gigantic 41m. The list of potential predators was headed by NatWest, down 30p at 1211p, and also included Lloyds TSB, 20p lower at 823.5p, and Halifax, down 5.5p to 685p. Any bid is expected to be pitched at around 200-250p per share.

Bank of Scotland missed out on the fun and shed 41.5p to 733.5p amid talk of difficult trading at its Capital Bank subsidiary. Market watchers whispered that in pre-closing season period briefings BoS has told analysts to reduce their expectations for Capital, which contributes around a quarter of the group's profit, because trading has been lacklustre.

HSBC fell 20p to 746.5p on confirmation that its acquisition of the Republic of New York bank might be delayed by a money laundering probe.

The metals group Billiton, results next week, dug a 6.75p rise to 261.5p on firmer commodity prices and rehashed rumours of a bid from rival Rio Tinto, up 10p to 1120p.

Catering giant Compass served up a 14.5p rise to 611p on whispers of forthcoming bumper results.

The rate-sensitive telecoms were hammered by US rate fears. Colt Telecom plummeted 74p to 1307p; Vodafone Airtouch shed 51p to 1203, while BT rang up an 18p loss to 947p after unveiling lower call charges.

Drinks group Allied Domecq poured 20p lower to 574.5p on profit-taking, although news of a chunky $1.3bn bond issue from Canadian leisure giant Seagram reawakened takeover talk. Music group EMI, down just 2.75p to 527.5p, could also be a target.

Media stocks were active. Scottish Media Group firmed 2p to 900p after confirming talks to buy GMTV, where Carlton, down 3p to 469p, and Granada, 12p lower at 567p, each have a 20 per cent stake.

Television production company Flextech benefited from its 18 per cent stake in SMG and jumped 35p to 970p. Talks of deals with BSkyB and the BBC were also heard.

In the mid-cap index dealers rediscovered their appetite for hi-tech stocks after positive results and bullish comments from computer services group Sema, up 7p to 697p. Rival Admiral, 52.2p higher at 817.5p, led the pack, followed by CMG, 70p better at 2,010p, and the minnow Kalamazoo Computers, 6.5p higher at a 12-month high of 71.5p.

The blue-chip group Misys joined the tech bonanza, rising 19.5p to 561.5p, while chip designer ARM jumped 30p to 928.5p after winning a contract to supply Nintendo's new Game Boy kits.

Poor interims sent engineer Senior 14 per cent - or 19p - lower to 116p and prompted house broker ABN Amro to slash its forecasts.

Building materials group Aggregate Industries built a 3p advance to 79.5p on hopes of imminent good results and vague talks of a bid, possibly for Tarmac, down 6.75p to 501.25p.

Minnow Baggeridge Brick climbed 4.5p to a yearly peak of 115.5p on talk that it is soon to be allowed to use two landfill sites in the Midlands.

Electrical contractor T Clarke buzzed 3.5p higher to 222.5p on whispers of a bid from a builder, possibly John Mowlem, down 0.5p to 140p.

Racecourse group Arena Leisure galloped 7.25p higher to 46.25p on talk of a bid or of a deal to beam live racing on the Net. Clothing retailer QS Group bagged a 7p rise to 43.5p on rehashed bid talk.

Posh store Fortnum & Mason, up 150p to 525p, attracted some speculative support ahead of forthcoming results. Equally posh shoemaker Church & Co was kicked 90p higher to a record 880p after confirming takeover talks. Italian groups Prada and Della Valle are the favourite suitors.

Coal minnow Consolidated Coal was suspended at an all-time low of 122.5p after a 40p fall, pending clarification of its financial position.

SEAQ VOLUME: 971m

SEAQ TRADES: 67,555

GILTS INDEX: 105.17 -1.33

MEDICAL SOLUTIONS, the former Turnpyke, is thought to be plotting a bolt-on buy.

Followers of the stock, which slipped 0.5p to 8.5p yesterday, believe Medical has its eye on a small company in the medical devices sector and an announcement could come as early as next week. In July the group paid around pounds 1m for Fairfield Imaging, a specialist provider of digital imaging used in research, and said it wanted to expand further by acquisition.

BRACE YOURSELF for a bit of action at Corporate Services Group, up 2p to 109p. The troubled recruitment and training group, once stalked by Michael Ashcroft, announced yesterday that the feared UK Active Value Fund had increased its stake to more than 10 per cent.

UK Active, run by Julian Treger and Brian Myerson, has a reputation for shaking up underperforming companies. CSG could be next.