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Market Report: Takeover bids, real and rumoured, boost second liners

The stock market is mesmerised by the tantalising prospect of a frenzied takeover spree.

After merger Monday, when deals estimated at pounds 67bn were on offer, the market has cast around, seeking likely victims.

With many companies cash rich and their management prepared to chance their arm there is talk the City's corporate community is in danger of being overwhelmed by the activity.

Takeover bids, real and rumoured, have in recent weeks provided a spur for non-Footsie shares with the FTSE 250 index and the FTSE SmallCap index hitting new peaks.

There is also a distinct impression many second and third liners offer better investment value than their peers.

Yet, although the two indices have climbed to new highs, they still lag a long way behind Footsie.

Since the start of the year Footsie, including dividends, has risen a remarkable 31 per cent; the 250 index has managed a 13 per cent gain and the SmallCap 12.3 per cent.

Much of yesterday's takeover speculation was among supporting shares. BICC, in late hectic trading, surged 21.5p to 208p, highest for six months, on excited talk of a bid today. The Italian Pirelli group is the name in the frame.

English China Clays, up 14p to 290.5p, was another tipped for action with RioTinto rumoured as the predator.

T&N rose 2.5p to 256p as US group Federal Mogul lifted its offer to 260p; not high enough, some argue, to scare off a counter bidder. WH Smith, planning a break-up, edged ahead 3.5p to 405.5p.

Little engineer Widney jumped 9.5p to 45.5p after a sharp advance forced the admission it was in bid talks.

Among Footsie constituents EMI had an early spin, up 15p, on renewed speculation of a Seagram bid, but by the close the gain had been cut to 3p at 613.5p.

BT, on the bid mania engulfing the American telephone industry, led Footsie with a 24.5p gain to 471.5p. Ladbroke managed a 10p canter to 307.5p and Vodafone 10.5p to 357.5p.

BAT Industries softened 4.5p to 596.5p after agreeing terms with Zurich Insurance.

Norwich Union, where whispers of a Lloyds TSB bid are often heard, enjoyed another busy session, climbing 6p to 362p, highest since flotation. Royal & Sun Alliance fell 7p to 624.5p on profit worries.

National Power, up 14.5p to 565.5p, and PowerGen, 7p to 759.5p, enjoyed Societe Generale Strauss Turnbull backing. SBC Warburg put an 800p target price on PG.

Coach builder Henlys motored 25p to 396p. Talk of major contracts is in the air. Stagecoach, which saw analysts on Wednesday, and Cowie are thought to be near placing orders. The company is also believed to be close to clinching a Far Eastern acquisition.

Capita, a management group, rose 24p to 313.5p on US presentations and Vega, the software provider hit by a profit warning last month, rose 20p to 245p after winning an RAF contract worth pounds 6m.

Jarvis, the construction and rail maintenance group, advanced 31p to 318.5p; it is near to agreeing terms with the Government for the takeover of the Fastline maintenance company.

Medeva introduced a little comfort into the drugs sector, gaining 20.5p to 245.5p after offering optimistic projections for its hepatitis drug.

Newsquest, the newspaper group, made a disappointing debut, reaching 252.5p from a 250p placing.

Property developer Wiggins touched a 12.5p peak after confirming it intends to resume dividend payments.

Coffee Republic frothed 6p higher to 26p. Its first deal since coming to market, via a reverse takeover of the Arion property business, is a link with French Connection to run a coffee bar at the fashion chain's Covent Garden store.

Metalsrussia, which arrived on Wednesday, rose a further 9p to 79.5p. It supplies steel from the former Soviet Union to Asia.

Chemical Design fell 20p to 90p; the shares have collapsed 120p in two days on a profit warning. Titon, a ventilation group, fell 14p to 92.5p after warning profits would be below expectations at around pounds 1.5m.