Market Report: Talk of a Seagram strike sparks hectic trading for EMI and Allied

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The Independent Online
Is Seagram, the Canadian showbiz to spirits giant, building a war-chest for a takeover strike? For a time the stock market displayed intense excitement at the possibility of Seagram action, with its two likely victims, Allied Domecq and EMI, enjoying brief but hectic bouts of trading.

The sale by Seagram of a parcel of Time Warner shares was responsible for rekindling what has become one of the market's perennial takeover yarns.

With many convinced that Seagram must soon produce a takeover strike, the activities of the Canadian group and the ruling Bronfman family are closely monitored. So when Seagram raised more than $1bn there was an immediate suspicion it was building up its cash reserves.

The creation of Diageo through the merger of Grand Metropolitan and Guinness has put pressure on Allied to restructure its spirit side, which now looks vulnerable. A deal with Seagram - a merger or trading pact - must appear to be its most obvious route.

There is also the possibility that Seagram, with its own spirits business under similar pressure to Allied, could mount a full bid for the Beefeater gin to Teacher's whisky group.

More likely, however, is a shot at EMI. The Bronfmans have fallen in love with the glamour of the entertainment world and seem more keen to develop their showbiz empire than the humdrum spirits side. With EMI, after poor trading, looking exposed, many observers believe it will be the eventual Seagram target. Its shares, 647.75p in May, spun 6p higher to 472.5p after touching 480p. Allied closed 10p up at 563p after 570p.

Seagram also influenced Diageo. Its warning that Asian revenue had plunged more than 50 per cent left Diageo off 15.5p to 550.5p.

Other blue chips had a volatile session. Footsie was at one time 79.3 points higher; after dipping into the red with an 18 decline in the final 30 minutes it managed to end with a 10.6 plus at 5,606.4.

It was a case of being better to journey than to arrive. Anticipating a no-change bank rate decision shares, particularly financials, turned on a robust display. By the time the bank rate decision was known they had already lost some of their lustre. New York's failure to cling to an early gain and then a late futures sell-off, thought to be instigated by Merrill Lynch, piled on the pressure.

Among the more violent swings was British Energy which moved between a 50p fall to a 12p gain before ending 14p off at 461p.

Financials had another rip-roaring day with excited talk of corporate action. Halifax jumped 35.5p to 938p and other former building societies made headway. Norwich Union improved 15p to 450p and GRE added 21p to 408p.

Asda, with help from Dresdner Kleinwort Benson stretched 6p higher to 206p. SBC Warburg pushed advertising agencies, with WPP 17p firmer at 268p. GKN, helped by the growing tension with Iraq, was the best-performing blue chip, up 78p to 1,326p; British Aerospace rose 62p to 1,696p. Imperial Chemical Industries, on its figures, improved 39p to 978p; Cable & Wireless dialled a 23.5p gain to 614.5p following its alliance with Nippon Telegraph Telephone.

Compass, the contract caterer, hardened 35p (after 40p) on the rumours of a bid from Rentokil, firmer at 297.5p.

IT shares were encouraged by a pounds 71m agreed offer for Rolfe & Nolan, which surged 137.5p to 497.5p.

Hardy Oil & Gas jumped 37p to 285p after a "substantial" gas find in Pakistan; Cairn Energy and Tullow Oil were unchanged at 433.5p and 147p as the long silence over their Bangladesh developments continued.

Newcomer Athlone Extrusions, placed at 77.4p, ended at 97p. Stanford Rook, figures next week, rose 9p to 141.5p. There is vague talk of new drug developments. The shares soared to 635p last year before hopes of a TB treatment breakthrough were dashed.

Aukett Associates, a design group, held at 6.75p as its Spanish joint venture partner lifted its stake to 8.18 per cent, buying 750,000 shares at 6.5p.

Jumbo, the old Self Sealing Systems, jumped 11p to 35.5p. SSS's shares were quickly pricked, collapsing from a 54p placing to 17.5p. The company then merged with Jumbo in a cash and shares deal. Jumbo supplies hot air balloons for advertising promotions.

MDIS, the computer services company renowned for a series of profit warnings, firmed 4p to 48.5p on the buzz that it is over the worst and its next set of results will be encouraging. In 1994 the shares were 239.25p.

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