Market Report: Second-line rail companies could be next bid target

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TWO of the stock market's second-line rail companies are looking increasingly vulnerable to takeover strikes.

GB Railways, running the Anglia franchise, is seen as a target for FirstGroup; Prism Rail, which started with the London Tilbury and Southend services, is another possible FirstGroup target, although some wonder whether it, too, has its sights on GB.

Shares of GB steamed ahead 25p to a 231.5p peak, capitalising the company at pounds 19m. The much bigger Prism gained 7.5p to 402.5p.

FirstGroup, with bus and train interests, was little changed at 406p. Stagecoach improved 15p to 1,205p and National Express 6.5p to 993.5p.

Small, unquoted transport companies have in recent months found themselves on the receiving end of generous bids. GB and Prism, both traded on the junior AIM market, could be the next to fall.

The stock market enjoyed the May sunshine. Once again supporting shares made the running with Footsie, after some hesitation, scoring a 31.8 points gain to 5,969.8. Around lunchtime it was down 39.5 but a strong New York display, on the back of jobs figures, helped sentiment.

But supporting shares captured the glory. The mid cap and small cap indices stretched to new peaks; the mid cap jumping 38.4 to 5,741.1 and the small cap 18.7 at 3,704.6.

More takeover action on the under card prompted gains. Three companies said they were in bid talks. Concentric, an engineer, put on 38p to 145.5p; Gibbon, a maker of printing inks, achieved a 48p gain to 213.5p and SDX Business Systems jumped 58p to 353.5p. But Trust Motor reversed 31p to 165p after bid talks broke down.

Nycomed non-voters, probably the most volatile Footsie share, led blue chips with a 159p surge to 2,009p. Reuters, BTR and Unilever were among other Footsie front runners.

Super stores drifted. Asda lost 5p to 189p and Tesco 8p to 560p. Safeway, due to report next week, recovered a 12p to close up 3p to 368p.

The chain's year's figures will be poor. It has already warned that trading is tough and many believe it is only the possibility of an Asda bid which has prevented the shares bumping along at around 300p. The year's results are expected to be around pounds 375m, down from pounds 430m.

Insurers Commercial Union and General Accident, merging to form CGU, will report for the last time as separate companies next week. Their combined first-quarter profits are likely to be less than half what the two made in the same period last year. CU ended 12p higher at 1,140p and GenAcc shaded 2p to 1,328p.

EMI dipped 2p to 573p as doubts about a bid continued to weigh on the shares. After hours, it said talks had been terminated. BOC, figures next week, fell 33.5p to 976.5p as Dresdner Kleinwort Benson lowered its recommendation for the chemical group from hold to sell.

Christie's International, the auctioneer, hardened 21.5p to 317p. Stories that the Bahamas-based tycoon Joseph Lewis collected 400p a share for the 29 per cent stake he sold to French investor Francois Pinault are causing a stir. Because the share deal was concluded outside the market there appears to be no need for either party to disclose the price, leaving the way clear for rumours to circulate and possibly create a false market.

If Mr Pinault did pay as much as 400p he would have to offer the same price to other shareholders, should he mount a takeover bid. There is increasing speculation that he is not the passive investor some suggested when he swooped.

Capita, the business support group, strengthened 28.5p to 574.5p on investment meetings and Verity put on 2p to 103.5p following more licences for its NXT wafer-thin sound technology.

Digital television presentations lifted Carlton Communications 9.5p to 517p and Granada 4p to 1,087p. Pace Micro, a boxtop maker, jumped 7.5p to 82.5p.

Geo Interactive Media firmed 2.5p to 164p after revealing it hoped to place 18 million shares, raising at least pounds 19m, as part of a move from AIM to full listing. The placing will be between 125p and 150p a share.

Cantab Pharmaceuticals was the day's drugs winner, jumping 61.5p to 687.5p. Behind the surge was a claim that its gene technology had proved successful at transporting cancer-killing protein.

NFC, the old National Freight, motored 11p to 187.5p. A share buyback is due to start soon and Robert Fleming Securities rates the shares, forecasting profits will climb from a depressed pounds 67m to pounds 125m this year.