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Market Report: Regent's interest in SFI adds froth to brewing sector

Another battle of the beer pumps could be about to break out in the stock market. High flying Regent Inns has swallowed a 5.5 per cent interest in smaller rival Surrey Free Inns and was yesterday said to be approaching large investors offering to buy their shares.

SFI, strong in recent weeks, rose 2p to a 270p peak, pricing the company at pounds 28m. Regent, up 9p at 248p, is valued at more than pounds 200m.

The Whitbread leisure giant is among SFI's backers, through a loan stock which is convertible into around 4.5 per cent of the capital. It inherited the stock when it acquired the UK brewing interests of John Labatt, the Canadian brewer which pumped around pounds 500,000 in SFI as part of a rescue package.

Since running into difficulties a few years ago SFI has made strong headway, building on its Litten Tree formula for big pubs. Greig Middleton, the stockbroker heading Regent's buying spree, has forecast SFI profits of pounds 1.2m for the year just ended and pounds 2.3m for the current year.

Last year Regent bid unsuccessfully for Unicorn Inns, with the pub chain eventually falling to Morland, the Thames Valley brewer.

Regent's interest in SFI is the latest example of a growing ferment among the pub groups, many evolving following the Government's controversial Beer Orders which forced large brewers to sell 11,000 pubs.

Enterprise Inns and Inn Business have recently made pub acquisitions and there has been talk of bids for Tom Cobleigh, up 3p at 249p and Old English Pub Co, 10p higher at 148p.

SFI had apparently been given the impression Regent's 5.5 per cent stake was a passive holding. The aggressive buying by Greig Middleton has prompted it to complain to the Stock Exchange about Regent's tactics.

The rest of the stock market rallied after Friday's relapse with the FT-SE 100 index gaining 22 points to 3,728.8. But trading was pathetically thin with few investors, big or small, prepared to take significant action.

British Aerospace remained the star attraction, climbing a further 24p to a peak 961p. Four years ago the company looked grounded with the shares 125p.

The latest surge has been accompanied by rumours of alliances with Boeing and the flotation of Airbus Industrie where BAe has 20 per cent. Merrill Lynch's prediction the shares are worth 1,400p has also been an important influence.

British Airways rose 4p to 553p as stories circulated its link with American Airlines would be announced today.

Bank of Scotland fell 16.5p to 248p as hopes of an early takeover bid were dashed by Standard Life's decision to spread its 32 per cent stake among institutions. The market is convinced a single buyer was prepared to take the stake, thereby triggering a bid.

Football clubs, Manchester Utd and Tottenham Hotspur, enjoyed the Murdoch generosity over Premiership television rights and BSkyB ignored talk it had overpaid with a 6.5p gain to 437p.

Ladbroke, in busy trading, was back among the takeover runners with a 6p gain to 188p and WH Smith rose 21p to 481p on reports it would pay Boots pounds 50m to take its half share in the struggling Do It All chain.

A de Gruchy, a Channel Island retailer, added 20p to 190p as Merchant Retail declared it had acquired 883,000 shares at 180p and taken options on a further 2.4 million, giving it 23.3 per cent. A startled de Gruchy said it wanted to hold talks with Merchant Retail. The Channel Island company runs Jersey's top department store.

Geest, the food group, gained 20p to 232p on the feeling cash rich Unigate will pounce. GGT, the advertising agency, improved 6p to 250p on continuing bid speculation but Blenheim, the exhibitions group where United News & Media has expressed interest, fell 20p to 438p.

Anagen was at one time down 27p to 42p following reports of "serious problems" in developing its AuraFlex blood testing system. There was a partial rally to 53p when the company said it remained confident about its prospects.

Phytopharm jumped 50p to 268p on encouraging phase 111 tests for its eczema treatment and ahead of figures today Amersham International put on 35p at 1,015p.

Cairn Energy continued to reflect Mobil bid talk, gaining 27p to 301p and waste disposal group Caird put on a further 24p to 343p following last week's upbeat statement.

B Elliott, the engineer, gained 2p to 99p; it is holding an investment presentation today.