Market Report: Prospect of takeover spree a turn-on for TV shares

TELEVISION shares stole the show as the tantalising prospect of a rip- roaring takeover spree captivated the stock market.

Since it became apparent that the rules may be changed to allow a takeover free-for-all in the industry TV shares have been remarkably strong, outperforming the rest of the market.

The swoop by Granada Group to pick up 14.99 per cent of the preference shares of LWT (Holdings), the London weekend TV network, provoked the latest excitement. LWT shot ahead 91p to 466p. Granada, down 3p at 417p, paid 500p a share. Barclays de Zoete Wedd handled the deal.

Anglia TV and Central Independent TV, regarded as the most desirable regional properties, quickly responded. Anglia jumped 36p to 353p, Central 107p to 2,065p.

Since the start of the year Anglia has risen from 194p and Central from 1,615p.

Grampian TV rose 23p to 236p, Scottish TV 25p to 424p and Ulster 21p to 480p. Yorkshire-Tyne Tees TV Holdings, where LWT has a 14 per cent interest, gained 14p to 199p. In May LWT paid WH Smith 200p a share for the Yorkshire stake.

Carlton Communications, however, was a conspicuous absentee from the TV romp. It fell 13p to 770p, reflecting the surprise departure of its managing director, Keith Edelman, to the Storehouse retailing group, up 3p at 212p.

The rest of the market put on a much less enthusiastic performance. Although the FT-SE 250 index climbed 5.2 points to a new peak of 3,229.1 the FT-SE 100 blue chip index lost 11 to 2,886.

Interest rate hopes, which provided much of Monday's strength, evaporated with the Government's cash-raising efforts, the pounds 5bn-plus BT3 share sale and today's Government stocks auction, focusing attention on the huge demands being made.

The appearance of United Newspapers' pounds 190m rights issue underlined the steady cash drain companies are also inflicting on a market which is already aware that, largely for technical reasons, dividend payments in the third quarter of this year will fall to a veritable trickle. United shares fell 11p to 574p.

Thorn EMI, one of the few blue chips due to pay a dividend in the third quarter, could find itself in demand, particularly from income funds. But the shares fell with the rest yesterday - down 5p to 910p.

The market was also unsettled by talk of big sell programmes. Smith New Court may have conducted a relatively small one but there was little evidence of a significant sale exercise taking place. However, some suspect that one lurks.

Rank Organisation fell 16p to 780p as the story that the US Xerox group will buy Rank's half share in the British Rank Xerox office equipment business subsided. But the suspicion lingers that Rank and the US group want to reach an agreement.

One suggestion is that Rank is considering issuing bonds, possibly as a rights, convertible into Xerox shares. Such a move would represent a deferred sale although Rank would collect its cash with the sale of the bonds.

Geest, the fresh food group, put on 13p to 384p as the long-running banana quotas saga came to an end with the EC ruling in favour of African and Caribbean produce. The decision is seen as favouring the likes of Geest and Fyffes, the Irish food group, unchanged at 100p.

In May Geest warned that a banana price war had devastated profits and interim figures could be no more than break-even. But the possibility of takeover action continues to intrigue. The new EC rules will freeze out the big US banana groups. Already one of them, Dole, has tried unsuccessfully to take over Fyffes.

Confirmation of the new EC regime, which comes into force next month, could prompt Dole, or one of the other US groups, to descend on Geest, which has held a series of investment meetings in the past few days.

Tiphook, the container leasing group, fell 10p to 322p although the US love affair has become even more ardent. ADR shareholdings, held through the Bank of News York, have reached a remarkable 35.29 per cent. Recently Paul Ehrlichman, a US fund manager, predicted that Tiphook's earnings would double in the next six to 12 months. He has clearly encouraged transatlantic demand.

BAT Industries fell 7p to 421.5p as the cost of the US cigarette price war started to be felt. Wellcome was again under the whip of US influences with new moves on Retrovir, the anti-Aids drug, leaving the price down 25p at 623p.

Ahead of Friday's results Asda, the recovering supermarket group, rose 1p to 73.5p in active trading. Smith New Court is looking for pounds 140m with pounds 205m next time. 'We remain what we have been - strong buyers of this special situation,' it says.

Hodder Headline, the book publisher born out of the merger of Headline Book and unquoted Hodder & Stoughton, returned at 355p. Effective rights price is 351p.

Danka Business Systems, the American office equipment supplier, improved 40p to 895p. Its US management is holding investment meetings this week following the takeover of three US operations and last week's move into the UK with the acquisition of the Hull-based Saint Group for pounds 9m.

Sunleigh, the leisure products group, stuck at 9p as Babcock International continued to dribble out stock. It has sold another 760,000 shares and now has 7.92 per cent.

The FT-SE 100 index fell 11 points to 2,886 but the second line FT-SE 250 index reached another peak, up 5.2 to 3,229.1. Turnover was 562 million shares with 26,987 bargains. The account ends on Friday with settlement on 12 July. Government stocks weakened

Stockbroker Beeson Gregory returned two shares to market. Downiebrae, to become GBE International, traded at 68p following the takeover of GBE, an engineer. The deal involves a vendor placing and rights issue. Suspension price was 77p. Builder Creston, halted at 18.5p, re-emerged after acquiring Co-ordinated Land & Estates for shares. The price reached 26p, closing at 23.5p.

Metrotect, which produces anti- corrosives for pipelines, has been actively traded in its first two days on the market with Seaq putting volume at more than 8 million shares. Placed at 108p by Panmure Gordon the shares reached 139p. They closed at 127p. Kleinwort Benson believes profits could reach pounds 3.1m in the year to March but warns that the shares would be overvalued at 140p.