Market Report: Takeover talk sets Asda's tills ringing

A NEAR hysterical rush into Asda sent the shares of the nation's third-largest supermarket chain soaring 17.25p to 176.5p. By Asda standards it was an incredible jump; on a good day the shares move 5p.

Wal-Mart, the big US retailer thought to be stalking a British retailer, was largely responsible for the excitement. Kingfisher was also in the frame. But independent research suggesting the group is winning market share and a series of meetings with analysts also contributed to the upsurge.

According to Seaq, turnover nudged 39 million shares with three-quarters of the business conducted through the old- fashioned market-making system.

The pattern of the Asda share turnover suggested it was speculative interest that dominated the buying. Wal-Mart, which has already moved into Germany, has made no secret of its desire to expand elsewhere in Europe.

The stock market is convinced it will not be long before it descends on a British operation. Asda, because of the shape and size of its retail spread, is seen in many quarters as an ideal acquisition for the Americans. Rumours have swirled about a deal but Asda has in the past denied any talks were going on. Kingfisher could also contemplate an Asda strike.

Archie Norman, the Asda chief, is a former Kingfisher finance director and it is known the two retailers have held exploratory talks. Kingfisher appears to have reacquired its taste for food and is testing the hyper- market concept.

Asda is not the only group seen as a potential Wal-Mart target. In recent months Safeway, MFI and Booker, the cash- and-carry chain, have been the subjects of intense speculation.

The independent AGB survey showed Asda was out performing its supermarket rivals. The analyst meetings, which appeared to underline the AGB encouragement, are being held before the chain goes into its close season ahead of results.

Asda shares were at one time up 18.25p; they peaked at 214p last summer and, with talk of price wars and Government probes undermining supermarket sentiment, fell to 140p last month.

The rest of the market replicated Wednesday's display. Blue chips suffered a modest reverse but the mid-cap, and to a lesser extent, the small-cap indices moved ahead. Footsie fell 27.5 points to 6,466.1; the mid-cap jumped 69.8 to 5,707.3 and the small-cap rose 5.2 to 2,449.1. It was another squeezy session with expectations of corporate activity providing much of the action.

But Billiton and Rio Tinto owed their strength to the overnight advance of commodity shares on Wall Street, where investors took the view the recovering world economies will trigger fresh demand. Billiton gained 18p to 187.5p and Rio 92.5p to 1,004p.

Imperial Chemical Industries duly clinched its pounds 1.7bn sale to the US Huntsman group and rose 23.5p to 659p; at one time the shares were down 25.5p.

BT firmed 9p to 1,084p on Goldman Sachs support and Thames Water rose 27.5p to 915.5p with Credit Lyonnais offering support.

Investec Henderson Crosthwaite put J Sainsbury, trading statement today, on its sell list and Teather & Greenwood moved Scotia, the drugs group, from buy to sell. Sainsbury firmed 5.5 p to 375p and Scotia, ending development of a cancer drug, fell 13p to 126p.

On the takeover front Alexander Russell, the aggregates group, tumbled 25p to 112.5p after calling off talks with RMC, up 53p at 918p.

CA Coutts held at 165p; after the market closed it was announced that the company's independent director, Henry Cubbon, had rejected a 160p management buy out and the bid had been dropped.

Polypipe flushed 9.5p higher to 202p as IMI, up 27p to 299p, produced a 200p cash offer. Ilion, the computer consultancy group, rose 26p to 120p, as a takeover approach, presumably from interests related to former chairman Wayne Channon, was signalled. Mr Channon and friends have been stake building. VDC, distributing products to vets, gained 30p to 175p after a 190p bid was indicated.

Fife, an ironmongery group now largely a cash shell, rose 5.5p to 66.5p with disco chain Northern Leisure displaying predatory intentions. Any deal would, in effect, be a cash raising exercise by the dancing group.

Lasmo gushed 19.25p to 139.75p, seemingly on institutional interest, although some wondered about corporate action. Rank, up 21.75p to 271.25p and, yet again, Pilkington, 5p to 84.5p, were drawn into takeover speculation.

The mid-cap index's progress was in part due to a recovery by engineering and packaging and paper shares. Glynwed improved 18p to 219p, Premier Farnell 17.5p to 245p and Rexam 16.5p to 234p. The improving housing market helped MFI, the furniture chain, achieve a 7p gain to 49.5p.

Recent high flyers, such as Dixons, down 84p to 1,387p, were at a low ebb, and Astra Zeneca's headache continued with a 76p fall to 2,650p. The shares have yet to score a solitary gain since the Anglo-Swedish merger was completed last week.

Other drug groups were under the weather with Morgan Stanley said to be making cautious noises. Glaxo Wellcome fell 113p to 1,885p.

Waste Recycling fell 17.5p to 459p despite bullish noises form BT Alex.Brown. It said: "We continue to expect the stock to outperform on a longer term view, given the group's well-above-average forecast growth profile."

Food group John Lusty firmed 1p to 5.5p on director buying, and Intelligent Environments jumped 20.5p to 105p after an investment meeting.

London Pacific's high-flying display took it a shade too close to the sun and the shares fell 75p to 432.5p. Their giddy display lifted the price 288p in two days as the market grew excited about its US Internet associations. In November the shares were down to 155p.

On Ofex ICollector, an Internet auction and antiques business which has moved ahead strongly, fell 70p to 310p. A company related to French tycoon Bernard Arnault, who runs LVMH, has taken a 20 per cent interest at 238p a share.

SEAQ VOLUME: 1.3 billion

SEAQ TRADES: 93,567

GILTS INDEX: 111.03 -3.07

SPORTS INTERNET has confirmed what the market suspected - its first takeover is near.

The group said yesterday it is in talks to buy a leading Internet sports and gaming group. The shares arrived last month at 55p; they rose 25p to 162.5p - a peak. Behind the company is former City analyst Chris Akers. He created the business to take advantage of takeover opportunities among the fledgling Internet companies.

NORTHERN PETROLEUM, an oil group which has collapsed from nearly 60p to 2.5p, doubled to 5p as a rescuer materialised.

Bruce Rowan, a shareholder, is pumping pounds 100,000 into the group in exchange for shares and hoping to arrange further finance. His holding will remain below 29.9 per cent. Derek Musgrove, ex-RioTinto, becomes managing director, and oil analyst David Roberts has joined the board. Ellis & Partners become stockbrokers.