Market Report: McAlpine bid talk builds sector rally

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The Independent Online
SHARES in the building and construction sector went into overdrive yesterday, fuelled by bid rumours and more confidence by investors that the Government would hold fire on interest rates.

The takeover spotlight fell firmly on Alfred McAlpine. Its shares climbed 15p to 211p, valuing the company at pounds 146m. Amec, up 4p to 109p and worth pounds 220m, was widely tipped as a possible bidder.

Analysts said there was good logic in merging the two companies. The main argument revolves around the Government's push for privately funded building projects.

One analyst said: 'The industry could do with some degree of rationalisation. We are moving into an era of privately funded schemes which would be beyond the financial reach of medium- sized companies.'

McAlpine and Amec are both based in the North-west. Another link is that Oliver Whitehead, McAlpine's chief executive, used to be a divisional director at Amec.

Given the market capitalisations of the two companies, analysts said any takeover move by Amec would have to involve an equity swap.

Firm merger talks are said to be taking place between the two camps. McAlpine refused to comment on the speculation.

A string of delayed trades went through in McAlpine towards the close as the rumour gained momentum. Prices of the late trades were being struck as high as 216p a share. There was also some late and active dealing in Amec, up to 110p a share.

The rest of the sector was buoyed by optimism on interest rates. A report by Barclays Bank that September mortgage lending had fallen sharply was largely ignored.

Big gains were made in particular by the housebuilders. Beazer Homes rose 12p to 140p, as did Barratt Developments to 183p. Bellway gained 11p to 191p, Persimmon advanced 10p to 230p, Tay Homes spurted 20p to 183p, Wilson Connolly climbed 11p to 195p and Wilson Bowden closed 10p better at 349p.

The colour blue was very prominent among the leading stocks yesterday. After an unsteady start the market roared away in afternoon dealings following a strong opening on Wall Street.

The US catalyst took the form of upbeat trading statements from some corporate giants, notably Chrysler and PepsiCo. The FT-SE 100 index closed 40.7 points higher at 3,073.

Volume trading was also better. More than 660 million shares went through the books, although the figure was slightly flattered by NatWest handling a bought deal involving 13.3 million House of Fraser at 203p. Fraser finished 1p softer at 207p.

The rumour tanks were full to brimming on the telecommunications pitch, most of which is represented in the FT-SE 100.

Cable & Wireless, up 5p on Monday, put on a further 20p to 415p. There was strong talk that the company could today announce a multi-billion-pound demerger.

Fresh reports by analysts suggest that the sum of C&W's parts could be worth more than pounds 11bn against a current stock market value of less than pounds 9bn.

Possible options open to C&W are a flotation of the Mercury One-2-One mobile telephone business or the demerger of Hongkong Telecom, in which it has a 57 per cent stake.

A heavy 16 million C&W shares were traded and options dealings, often a reliable indicator of a deal in the wings, were lively. More than 1,370 options contracts were dealt.

BT increased by 9.5p to 395.5p on renewed gossip that it was looking to buy full control of Cellnet, the mobile phone company. BT has a 60 per cent share and Securicor the remainder. Securicor ordinary rose 32p to pounds 14.45 and the 'A' by 20p to 929p.

The merriment spilled over into Vodafone shares, up 7p to 204.5p as the company announced an agreement with Compagnie Generale des Eaux to increase its involvement in mobile phone operations in France.

Elsewhere, the HP Bulmer cider company rose 8p to 443p on a positive trading statement. That lifted Merrydown 2p to 116p and Taunton by 6p to 169p.

Shares in the doldrums were few and far between. Asprey, the retailing group, was hit hard, dropping 17p to 135p on rumours that cast doubt on its financial position. Asprey countered with an after-hours statement that said the rumours were without foundation.

Buyers moved back into the market yesterday and pushed the

FT-SE 100 share index up 40.7 points to 3,073. More than 660 million shares were traded. The FT-SE 250 index advanced 24.1 points to 3,506.9. Gilt-edged stocks held steady.

Waterglade International, the deeply troubled property developer, has called for a suspension of its shares at 2p pending clarification of its financial position. The move comes less than a month after rebel shareholders, led by Wilson Ng, ousted the board of directors. There has been talk of a pounds 6m rights issue and capital reconstruction to address pounds 10m of negative net worth.

The slide in shares in Photo-Me International, which has a commanding 90 per cent share of the photo-booth market, was arrested with a 10p gain to 225p. There was some excitement at the idea that the Conservative conference would hear of plans to push ahead with national identity cards. Banks and building societies are also experimenting with personal photos on credit cards.

(Graph omitted)

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