Market Report: P&O and Forte star in tale of Gardner sale

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The Independent Online
THE P&O property and shipping group emerged yesterday as a surprise candidate, at least in the eyes of the stock market, to buy Forte's contract catering division, Gardner Merchant, which is up for sale.

As P&O shares sank 18p to 460p, Forte improved 7p before closing 2p higher at 169p.

Forte almost sold Gardner to the Compass Group in the summer. But the deal collapsed at the 11th hour with the two sides seemingly unable to agree on a price. It appeared that Forte valued Gardner at more than pounds 550m; Compass and its US partner, the American ARA group, were said to be nearer pounds 520m. Many observers were surprised that the deal stumbled over such a relatively small valuation gap.

Since then a variety of stories have flowed around Gardner, with a management buyout rumoured as the most likely development. But a French group has been put in the frame and Compass is said to still want bits and pieces of the catering business.

The Granada Group, which this week announced better-than-expected profits and enjoyed a strong share response, has also expressed interest. Granada is run by Gerry Robinson, who led the Compass buyout from Grand Metropolitan.

Until the latest rumours swirled, P&O, which has problems of its own and would be stretched to take on board Gardner, had not been linked with Forte's desire to get out of contract catering.

But P&O is, through Sutcliffe Catering, already a force in the contract catering industry and could see all, or at least part, of Gardner as a logical extension of its operations.

This week P&O shares have been under pressure, with worries about a cut dividend cited as the reason for the weakness. Yamaichi, the Japanese securities house, questioned whether the chairman, Lord Sterling, would be obliged to lower the payment once the year's figures had been stacked up.

But there is no doubt that P&O wants to maintain its payment and its supporters in the City have been quick to dismiss the cut suggestion.

The rest of the market had a listless session, with the FT-SE 100 index ending 11.6 points lower at 2,759.4. Hopes of another interest rate cut, based partly on sterling's strength, left little impression.

The placing of Abbey National's 29 million 'unwanted' shares and two sell programmes produced much of the action, with turnover reaching 676.1 million shares.

In a bought deal Kleinwort Benson and SG Warburg placed the Abbey shares at 360p. They closed at 366p, down 7p.

Glaxo Holdings was the outstanding blue chip, jumping 36p to 823p following the provisional US approval of its anti-migraine drug, Imigran.

Spring Ram, the bathroom and kitchen group, under pressure this week following an institutional sale of 7.7 million shares, firmed 3p to 92p as County NatWest said buy.

The investment house said the accounting irregularities at a Spring Ram offshoot appeared to be a one-off incident and the group 'continues its rapid growth'. County, which acted for the selling institution, expects profits this year to advance from pounds 37.6m to pounds 40m with pounds 47.5m in sight for next year.

The brickmaker Ibstock Johnsen edged ahead 1p to 39p with talk of a brick link with Tarmac, unchanged at 94p. Marley held at 85p as Credit Lyonnais Laing forecast profits down pounds 17m to pounds 8m this year but improving to pounds 23m next.

Lonrho put on 5p to 74p on speculation that the Malaysian Genting group was picking up shares; Hanson fell 8.5p to 227.5p following its results.

The retailer John Menzies rose 13p to 459p as it announced plans to abandon its Early Learning Centre business in the US, which it has been unable to sell.

T&N, the car components group, put on 7p to 155p, with Warburg making positive noises.

Expectations of a deal next week lifted the holiday group Owners Abroad 4p to 76p and Wolverhampton & Dudley Breweries improved 10p to 536p on its results.

Euro Disney lost more ground, 10p to a low of 683p.

Pepe, the jeans maker, returned to favour, improving 2p to 9.5p with some suggesting Novel Enterprises, a Hong Kong group, will make a bid. Novel has a 29.6 per cent stake acquired at 85p a share in March.

Huntleigh Technology, the healthcare group, reached yet another peak, up 45p to 915p. The shares have risen from 285p this year. The chairman, Rolf Schild, sold 20,000 shares at 900p, leaving his stake at 54.8 per cent.

Shares slipped back yesterday. The FT-SE 100 index ended 11.6 points down at 2,759.4 but the FT-SE 250 index improved 6.3 to 2,661.2. Trading was busy, with turnover reaching 676.1 million from 25,696 bargains. Government stocks, at one time up nearly one point, ended with modest falls.

Activity at J Saville Gordon, the engineering and property group. The stockbroker Harris Allday Lea & Brooks placed with institutions and private clients nearly 6 per cent of the capital. The shares came from an institutional investor. HALB expects Saville to produce profits of pounds 4m, up from pounds 3.83m, and estimates assets at 55p a share. The price shaded 0.5p to 33.5p.

Shares of Resort Hotels crashed in heavy trading to a 16p low. A statement saying it continued to trade 'in line with its budgets' encouraged a recovery to 19p, down 5p. Worries are growing about Resort's involvement with BES companies which could require the issue of more shares and stack up debts. Barclays de Zoete Wedd recently trimmed its profit forecast to pounds 8m.