Market Report: Owners Abroad lifts off on takeover talk

THE holiday group Owners Abroad was the new year high- flier, climbing 11p to 107.5p, as rumours swirled that a takeover bid was being prepared to block its cosy deal with Germany's LTU group.

On Friday, OA shareholders are due to meet to approve a trading alliance with LTU which, through its Thomas Cook subsidiary, will take a 12.3 per cent interest in the holidays group.

Some City institutions are known to be unhappy about the link. They feel the deal will, in effect, make OA bid-proof and the Germans should be encouraged to make a full-scale takeover offer.

But LTU has resisted pressure to broaden the deal. So any hovering predator must make a move before Friday's meeting.

Vertical integration is the trend in the travel business. The biggest travel group, Thomson, is well represented in the high street and Airtours last year acquired the Pickfords travel shops chain from NFC. The link with LTU will tie OA into Thomas Cook.

OA attracted considerable new-time business last week and yesterday the shares were actively traded, with Seaq putting turnover at 3.8 million. When the LTU link was announced last month the shares were 87p.

Airtours, up 20p to 320p despite a 6.7p dividend payment, was one name in the frame. But if it did move for OA it would almost certainly attract a reference to the Monopolies and Mergers Commission. A number of overseas groups were also touted as likely to be keen to break through the OA/LTU deal, which could freeze them from most of the UK travel business.

The rest of the stock market was in buoyant form with shares, in often busy trading, romping to another new peak. Encouraged by John Major's comments, investors shopped for recovery stocks and the deluge of New Year tips, said to top 150, also created interest.

Hopes that the Germans will at last cut their interest rates when the Bundesbank meets on Thursday helped sentiment; so did rumoured futures buying by Baring Securities.

It was enough to drive the FT- SE 100 index up 15 points to 2,861.5. But once again much of the action was outside the 100 blue chips with the FT-SE 250 index surging a more impressive 33.5 to 2,896.4.

Third and fourth-division shares were also in demand scoring, in percentage terms, some heady gains.

A raft of agency crosses ballooned volume. Much of the activity stemmed from investment houses moving shareholdings between their funds.

Drug shares continued their recovery. Glaxo Holdings, following approval in tablet form of its Zofran anti-nausea drug by the US Food and Drug Administration, put on 6p to 799p. SmithKline Beecham, benefitting from a push from NatWest Securities (formerly County NatWest), rose 10p to 506p.

Imperial Chemical Industries gained 11p to 1,070p. It is due to hold an investment meeting for Zeneca, the drug offshoot it is expected to hive off, on Monday.

Reuters, up 22p to 1,430, reflected a 'strong buy' recommendation by Merrill Lynch. Hillsdown Holdings, which has called an analysts' meeting for later this month, improved 10p to 143p.

It will be the first investment meeting since long-serving Sir Harry Solomon announced last month that he planned to step down as chairman.

Savoy Hotel attracted attention on indications that 4 per cent of the high-voting 'B' shares were on offer. The low- voting but more widely traded 'A' shares put on 7p to 720p; the 'B' shares stuck at pounds 45.

Supermarket shares recovered. J Sainsbury, responsible for starting the latest round of price-cutting, improved 10p to 574p. Barclays de Zoete Wedd made positive noises and there were rumours of a profit upgrading emerging today.

Berisford International, a New Year tip, rose 3.25p to 25.75p. After the market closed it became known that Associated British Foods had trimmed its stake by selling 1 million shares last week. It still holds 18.85 per cent.

Property group Hammerson, on the planned boardroom changes and the lingering suspicion a bidder will strike, continued to attract attention. The powerful ordinary shares rose 8p to 301p and the 'A' 7p to 278p.

Air London, the air charter broker, jumped 11p to 65p as a large seller was mopped up; Regal Hotel Group, active on New Year's Eve, scored the day's biggest percentage gain, up 133 per cent. The advance, however, was just one pence to 1.75p. The company returned from suspension last week after a creditors' voluntary arrangement.

Equities started the new year with another record- breaking run. After an uncertain opening the FT-SE 100 index wiped out a 16.2-point fall to close 15 points higher at 2,861.5. The FT-SE 250 index jumped 33.5 points to 2,896.4. Turnover reached 606.6 million, with 33,093 bargains logged. Gilts gave ground

International Media Communications appears to have been overlooked in the flood of new year tips. But it deserves attention. IMC is being developed by the French merchant banker David Cicurel. It is trading well and free of debt. A significant acquisition is, it is thought, being lined up that will complement its soft drink operations. The shares rose 0.25p to 5.25p.

Armour Trust, the sweets to security systems group, eased 1p to 37.5p yesterday after a firm performance in recent weeks. The market is intrigued by the attention Grand Central Investments has paid the company. It has gradually built a 20 per cent stake although it has had little contact with Armour. GCI has confectionery interests in the Far East.