Market Report: Takeover rumour pushes Rugby Cement up 4%

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The Independent Online
THE BUILDING materials group Rugby was in a constructive mood yesterday as rumours of a takeover grew louder and louder.

The UK's third-largest cement-maker jumped over 4 per cent, as punters positioned themselves ahead of the expected bid from a UK or overseas rival. The buying scramble left Rugby 4.5p higher at 112p with over 3.4m shares traded. The take-over of the group will be a two-stage affair. First, Rugby will complete the disposal of its joinery division for around pounds 300m. The struggling unit has been for sale for some time and the buyer, believed to be the private US group Jen-Weld, is close to signing on the dotted line.

The sell-off of joinery will leave Rugby as a cement-only group and should whet the appetite of some rivals. As last week's profit warnings showed, the company is having a tough time in subdued markets and its shares price has been underperforming the sector for some time. Shareholders' patients may be wearing thin and a cash-bearing predator would probably be welcomed with open arms.

Dealers are toying with a long list of names, but the most popular are the British group RMC, up 8p to 1,009.5, the Swiss rival Holderbank, Lafarge of France and Italy's Italcementi. Any of those is keen to expand its UK presence and would love Rugby's Eastern European exposure. The problems faced by cement producers were confirmed by market leader Blue Circle, down 6.25p to 454.75p after a bearish trading update.

The rest of the market was gloomy, with US interest rate fears weighing heavily on sentiment. The FTSE 100 closed 29.7 lower at 6,405.7 in very thin trading, as many traders preferred their Wimbledon-beaming TV screens to the dealing floors' monitors. Not even a strong rally in the Dow failed to dispel the apathy. The midcap managed to outperform with a 2.1 rise to 5869.2, followed by the Small Cap, 2.5 higher at 2653.8.

Bid whispers dominated the blue chips' session. Retailers were prominent on the rumour chart. Sainsbury checked out a 11.5p rise to 399.75p on continued speculation that Kingfisher, 4.5p higher at 755p, Tesco, up 1.75p to 168.5p or Marks & Spencer, unchanged at 364p, could propose a tie-up.

Somerfield, results on Thursday, jumped 10p to 297.5p after broker SG said "buy". The rumour mill sees the supermarket as a target for Asda conqueror Wal-Mart, or the Dutch giant Royal Ahold. Talk of a merger with Safeway, down 0.25p to 245p, was also heard.

Clothes retailer Storehouse shed 4p to 127p after rival Debenhams, down 10p to 430.5p said they were not in talks. However, dealers believe that Debenhams, or another predator, could soon move on Storehouse.

Financials were also excited by a bid rumour bonanza. Royal & Sun Alliance insured a 22p rise to 562.5p on talk of a merger with rival CGU, up 9p to 929.5p. Another mooted option is an asset swap, with CGU buying RSA's life insurance business in exchange for some its non-life operations.

Fund manager Amvescap rose 14p to 554.5p. Cash-rich Goldman Sachs is thought to be having a look. Halifax was 13.5p higher at 780p on vague rumours that is preparing to strike. On the negative side, NatWest lost 29p to 1,401p after denying a pounds 2.5bn offer for building society Bradford & Bingley, and Alliance & Leicester shed 7.5p to 874.5p after buying back over 300,000 shares at 873p. Some dealers whispered that A&L's buyback is a prelude to a paper bid for a rival.

Takeover waves lapped the telecoms sector. Telewest rang up a 10p gain to 288.25p as the long-awaited merger with Cable & Wireless Communications, down 7p to 623p, nears. A mooted third partner, US group NTL, kicked Newcastle United 15.5p higher to 85p after reports that it might resume bid talks with the football and rugby club. Cable & Wireless firmed 24.5p to 809.5p amid speculation that Deutsche Telekom is to buy One2One for up to pounds 11bn.

Energis completed the telecoms field day with a 21p rise to 1,551p. The market loved its 1.75 per cent stake in Internet goldmine Freeserve, soon to be floated by Dixons, up 2p at 1,202p. Gas group Centrica flared 6.5p higher as Merrill Lynch upgraded ahead of its purchase of the AA.

In a day of bid rumours, it was ironic that old chestnut Reckitt & Colman missed out. The stock plunged 27.5p to 697.5p after house broker CSFB slashed its 2000 profit predictions and Charterhouse repeated its "sell" advice.

Pub group Greenalls frothed 11.5p better to 344p amid returning whispers of a takeover. If Whitbread, down 9p to 1,029p, or Bass, down 6.5p to 913.5p. fail to win the pubs owned by Allied Domecq, up 10p to 607p, they could go for Greenalls. Sector peer Wolverhampton & Dudley firmed 5p to 615p after confirming that it might bid for Morland, up 14p at 475p, trumping the pounds 145m offer by Greene King, up 6.5p at 696p. Cafe Inns, the AIM-listed pub group, rose to 159p after unveiling a 164p-per-share approach by Cumbria-based Jennings Brothers, down 6.5p to 245p.

Outside the pubs, Computacenter buzzed 30p higher to 490p on rumours of booming trade and a possible US bid. Housebuilder Alfred McAlpine jumped 9p to 218.5p after a positive trading statement. It is planning a buyback of nearly 10 per cent of its shares to stave off an unwanted bid from a private investor. McAlpine's optimism sent Wimpey 5.5p better at 147.5p, while Beazer firmed 1.5p to 200p.

Engineer TT issued a much-leaked profit warning and collapsed 24.5p to 133.5p. Rival IMI, down 9p to 257p fell in sympathy. Industrial products- maker SEP Industrial came back from a two-month suspension and plummeted 4.25p to 6p after a devastating profit warning. Aerospace group Bridport flew 3.5p higher to a yearly peak of 114p despite rumours that the mooted bid is off. Paper group David S Smith dropped 0.5p to 144.5p. Today's results will be poor and will fuel recent bid talk.

Electronic tiddler Feedback beamed 14p better to 33.5p as the market warmed to its decision to go on-line but rival Deltron shed 12p to an all-time low of 76.5p after the collapse of MBO talks.

SEAQ Volume: 854.9m

SEAQ Trades: 63,330

Gilts Index: 106.64 +0.23

CORTECS, the troubled biotechnology company, fell 0.50p to 16.25p ahead of a keenly-awaited research and development meeting today. Analysts are expecting a positive update on clinical trials of two leading products, the results of which should pave the way to licensing agreements.

Cortecs should also announce its cash-burn rate has fallen from pounds 23m to below pounds 10m thanks, in part, to a projected cut in staff from 300 to below 100.

DEVRO, THE sausage-skin maker, is back in the bid spotlight. The shares sizzled 4.5p higher to 134p yesterday in fairly high turnover. The rumour is that the company could soon be the target of a bid from a Continental rival. Some punters believe the offer could trigger a counter offer from the management, which was thought to be looking at a buyout a few months ago. Devro's shares have slumped from a high of 545p last year and the company looks vulnerable.