While the FTSE 100 bobbed and weaved in Wall Street's wake, the supermarket chain put on a solid display, rising 7p to 265.75p with over 7.5 million shares traded.
The near 3 per cent hike came amid talk that Royal Ahold could launch a bid. The Netherlands-based retail giant was said to be ready to step into the breach left by the withdrawal of the US behemoth Wal-Mart from the UK bid fray. Safeway, the smallest of the UK's big four supermarket chains, was rumoured to be on the US group's takeover radar. But after Wal-Mart's recent decision not to empty its deep pockets on a British food retailer, dealers' attention has shifted to Ahold.
The Dutch group is the sixth largest supermarket chain in the world, with operations in the European Union and the US. It has a sizeable war chest after raising millions in the bond market and has never made any secret of its ambition to expand in Europe.
However, an alternative story suggested that Safeway could look at a tie-up with its smaller rival Somerfield, now merged with Kwik Save. Somerfield dropped 1p to 344.5p, even though an enlarged group, with its pounds 4.5bn market value and pounds 10bn of sales, could be a powerful rival to the market leaders Sainsbury, Asda and Tesco. The latter was in good form, soaring 8.25p to 193p on good speculative demand.
The rest of the FTSE 100 had a topsy-turvy session, swinging in a 147- point arc before closing 19.1 lower at 6,533.1. Wall Street was, once again, the main influence. The Dow's overnight burst through the 11,000 barrier was behind an opening rally in London. Minutes after the opening bell, the blue-chips index smashed its intra-day record with a 111.6- point rise to 6,663.
However, a weak start to US trading wounded the bulls and led to a speedy retreat in the afternoon. The undercard benefited from its insulation to the overseas gyrations and had a steadier session. The FTSE 250 closed 37.9 higher at 5887.5 while the Small Cap recorded a 13.8 gain to 2583.8.
Blue-chip watchers were treated to a rare sight: utilities topping the risers' chart. National Power surged 19.75p to 520.75p amid speculation that the departure of its chief executive will trigger a bid. Centrica, up 0.75p to 127p, in tandem with a US generator such as Duke Energy or Enron, was the hot favourite. A strike by the industry veteran John Devaney was also mentioned. National's spurned partner, United Utilities rose 33.5p to 736.5p after HSBC said "buy" and upgraded forecasts by around 3 per cent.
British Energy followed suit, closing 20.5p higher at 549p on a positive CSFB note. Thames Water benefited from the bullish sentiment and went 30p higher at 892p.
Allied Domecq was the only blue chip to rise above the utilities. The drinks group soared 57p to 543p after confirming talks to sell its pubs to Whitbread, up 29.5p to a 12-month peak of 1,086. The smart money is on Whitbread, results today, paying up to pounds 2.4bn in shares for the pubs. The deal will leave the drinks-only Allied vulnerable to a bid. Diageo, up 6p to 723.5p after a boardroom shake-up, or the Canadian giant Seagram, could have a pop.
Whitbread's decision to go for Allied left Greenalls looking friendless. The pub group collapsed 16.5p to 378p, even though Bass or Scottish & Newcastle could launch a bid. Rival Greene King was excited by the corporate frenzy in the sector, finishing 33.5p, up at 596p.
Profit-takers were in evidence in fancied sectors such as telecoms and media. Telewest shed 15.5p to 271.5p, while Orange lost 31.5p to 814.5p and Cable & Wireless was 23.5p lower to 868.5p on fading hopes of speedy corporate action.
United News & Media suffered a 32.5p setback to close at 727p as dealers reaped the rewards of its acquisition-led rally. Schroders fell 44p to 1,420p despite rumours of a bid from the newly floated Goldman Sachs.
Bids, real and rumoured, boosted the small and midcappers. Monument Oil & Gas flared 10p higher to 60.5p after agreeing a pounds 600m all-share bid from Lasmo, down 13p to 146.75p. The deal, and another rise in crude price, boosted fellow explorers. Enterprise soared 11p to 455p as it became the next bid favourite. British Borneo rose 10.5p to 186p amid on-going talk of a big discovery and corporate action.
Cox Insurance rose 2p to 201p as speculation of a merger with rival Hiscox, up 3.5p to 177.5p, resurfaced. United Assurance put on 15p to 483.5p, amid vague talk that Britannic, up 10p to 1,007 could propose a merger.
Seton Scholl shot 60p higher to 827p after confirming merger talks with the condom-maker London International Group, down 2.5p to 180p. The deal could be gatecrashed by the Australian group Pacific Dunlop or Safeskin of the US.
The pump-maker Weir sloshed 10p higher to 279.5p as whispers of a US bidder resurfaced. United Biscuits rose 8.5p to 202p on the return of old takeover talk. The inventions group BTG soared 26p to 293.5p after a large line of stock was cleared.
Disappearing bids did some damage. First Leisure lost 10p to 255.5p despite rumours of an imminent break-up, while BICC, the engineer, tumbled 5.5p to 99.5p as a bid by Wassall looked doomed. The gaming group London Clubs fell 8p although a 250p-per-share takeover is believed to be near.
Stentor was the minnows' star performer. The Irish telecom group rang up a 19p rise to 42.5p after striking a deal with the US giant GTE. Albert Fisher put on 2.5p to 10.75p on confirmation of its US disposal. The education group Nord Anglia issued a profit warned and shed 58p to 172.5p, while RJB Mining did the same and crashed 11.5p to 52p.
SEAQ VOLUME: 1.17 billion
SEAQ TRADES: 89,045
GILTS INDEX: 107.24 -1.06
NETBET, an Internet bookie, is rumoured to be in talks with a major media group over an on-line deal.
The shares, listed on the junior Ofex market less than a week ago, have been suspended at 230p pending an announcement.
The proposed agreement should enable Netbet to expand its customer base by offering its tax-free betting service on the media company's website.
IS A predator sniffing around Charterhouse Communications? Shares in the publishing group soared 3p to an all-time high of 19.5p yesterday amid talk that a larger rival is lining up a bid.
The AIM-listed group is a specialist publisher of personal finance magazines and would be a good catch for a competitor keen to jump on the PEPs and ISAs bandwagon. Last year, it posted a profit of over pounds 1.3m on sales of pounds 6.1m.