Market Report: Takeover talk swirls round dealers' darling

INDEPENDENT INSURANCE, one of the stockmarket's darlings, caught dealers' eyes yesterday amid talk that a predator is preparing a takeover strike.

The bid rumour was accompanied by whispers that the hugely-successful Independent will unveil a bullish trading statement at today's shareholder meeting.

The double boost sent the shares 26p higher to 258.5p on volume of over 1.4m. The "spot-the bidder" game focused on both domestic and overseas companies.

On the UK front, Lloyds TSB, up 17.5p to 1,015p, was the name in the frame. The black horse bank has made no mystery of its ambitions to branch out in other financial services and its name has also been linked to Allied Irish Banks, 8.5p higher to 1027.5p.

The list of potential overseas bidders was bulging with names, with the Australian insurance giant AMP in pole position. The Oz's group chief executive, George Trumbull, fanned the bid speculation yesterday, revealing that AMP is still looking to expand in Europe, the US or the UK.

In Britain, AMP owns the mutual insurer NPI, bought for over pounds 1bn last year, Pearl Assurance and the fund manager Henderson Investors.

Independent's insiders played down the bid rumour but dealers said that the company would be a hell of a buy for a UK bank or a foreign insurer, especially after a recent fall in its highly-rated share price.

Its founder and chief executive Michael Bright has built a focused business that specialises in commercial lines such as property insurance. A tight control of underwriting risk has helped Independent to outperform some of its larger rivals and the shares have soared from 45p in the 1993 float to a peak of 390p in 1998.

The good state of Independent's business should be confirmed at today's AGM, when Mr Bright, who owns a stake of nearly 6 per cent in the group, will update investors.

Among Independent's competitors, Royal & Sun and CGU yesterday said that in the first quarter UK insurance sales were subdued, while international demand was buoyant. The statements left Royal 1.5p higher at 527p and CGU 5p lower at 978p.

Prudential was the highest flying blue-chip, putting on 50p to 919.5p as Warburg said "buy" and the takeover of M&G went unconditional.

The rest of the market was rather sluggish, finishing modestly higher after Tuesday's record-breaking session. The FTSE 100 ended 5.2 up at 6,598.8, the second all-time high in two days. The mid-cap closed 5 points higher at 5,813.7, while the Small Cap posted a 5.9 rise to 2,548.3.

A slump in bond prices had little impact on stock prices. Gilts hit an eight-week low after the auction of pounds 500m- worth of long-dated paper was massively undersubscribed.

Kingfisher hit an all-time high, after rising 39.5p to 921.5p on continuing excitement over its pan-European Internet service. The B&Q-to-Comet retail empire's merger partner Asda bagged a 7.5p increase to 208p as rumours of a counterbid by Wal-Mart returned.

The US giant's spectrum was also haunting Safeway, where 7.6m shares changed hands. However, the supermarket chain lost 8.75p to 258.75p and dealers said the high turnover was probably due to the unwinding of a couple of large positions. The clothes retailer Arcadia put on 32.5p to 272.5p as brokers warmed to its interim results.

National Power was firmly in the bid frame after the surprise departure of the chief executive Keith Henry. Shares in the generator surged 15p to 496.75p amid talk that a US power group could strike. Enron, Duke Energy, Southern Co and Reliant Energy were all mentioned. John Devaney, the former boss of The Energy Group, and his financial backers could also have a go.

The demise of another chief, Mark Booth at BSkyB, caused a 29.5p fall to 550p in the satellite company as investors switched off.

British Aerospace flew 12p higher to 478.25p after confirming talks over a pan-European missile. Unilever, results today, rose 15.5p higher to 593p amid talk that it might bid for Revlon of France. The computer group Misys suffered from a US competitor's profits warning and crashed 25.5p to 579.5p.

The other big bid came in the undercard. The car-parts group Partco soared 53.5p to 233.5p after saying it was in advanced negotiations over a 245p- per-share cash offer. The privately-owned Unipart was the hot favourite, with one-time suitor Finelist and Ford, the recent buyer of Kwik-Fit, also mentioned.

Leisure stocks had a busy session. Stanley Leisure, the casino and bookie group, fell 5.5p to 248.5p after warning that poor racing margins will depress profits. The announcement unnerved Ladbroke. The UK's biggest bookmaker was a non-runner, losing 18.25p to 293.5p.

First Leisure did not look amused after losing 7.5p to 246p following the collapse of talks over the merger of its fitness unit with Cannons, unchanged at 192.5p. First could now be targeted by a big leisure group. Whitbread, down 15.5p to 1,049.5p, is the favourite but Bass, down 10p to 970p, Scottish & Newcastle, up 15p to 779.5p, and Greenalls, flat at 369p, could also launch a bid.

Fellow drinks group Allied Domecq downed a 3.5p fall to 509.5p on nervousness about today's results. A demerger of the drinks division could be on the cards.

Tomkins, the metal-basher, plunged 12.25p to 243p, hit by some late below- price deals. The catering group Compass was also stained by some roguish trades, shedding 27p to 665p. Affinity Internet logged on a 34p rise to 176.5p after winning the contract to put the Pru's bank Egg on-line. Another net minnow On-Line rose 22.5p after cutting interim losses.

Focus Dynamics, the engineer, jumped 5p to 35.5p after revealing a bid approach. The electrical distributor Sedgemoor rose 5p to 46p after receiving a 50.8p per share offer from rival Acal, unchanged at 460p.

The tool hire group Vibroplant, drilled a 7p rise to 65p after saying that its management want to buy at 70 to 75p per share.

SEAQ VOLUME: 1.18BN

SEAQ TRADES: 79,192

GILTS: 110.09 -0.30

ARLEN, a small electrical equipment maker, is thought to be close to bidding farewell to the stock market.

Insiders believe that the chairman and 9 per cent shareholder Greville Howard is considering a management buyout.

The management buy-out team could pay as much as 45p per share, valuing Arlen at some pounds 30m.

The shares fell 3p to 31.5p yesterday, barely a day after touching their 12-month peak of 34.5p.

NEWS of a large stake-buying at Artisan, a builder run by the entrepreneur Stephen Dean and listed on the Alternative Investment Market. The tax-exile investor David Rowland yesterday acquired 15.4 per cent in the company through his investment vehicle Rosenoble. Insiders say that it is unclear whether the purchase will lead to a takeover of Mr Dean's latest venture. Artisan shares rose 0.75p to an all-time peak of 8p.