Market Report: Talk of mystery mega-deal pushes FTSE to new high

THE RUMBLE of mega-deals was heard through the market as rumours that a large takeover bid will be announced in the next few days spread through the City.

As the FTSE 100 soared to a new all-time high, well-connected dealers were told that a deal will be unveiled soon, possibly as early as today. According to the gossip, a number of brokers were told to be in early this morning to prepare for the big announcement.

The whispers sent the stockmarket's rumour mill into overdrive. The traders' efforts to identify the main players in the bid focused on media, banks and telecoms. In media, there was talk that Rupert Murdoch's BSkyB, up 70.5p to a record 759p, is about to strike. After buying a 24 per cent in the German broadcaster KirchPayTV, Sky could move on to France and link-up with satellite TV operator Canal+. Mr Murdoch has always been hostile to a merger, but the market is persuaded that French conglomerate Vivendi, a shareholder in both BSkyB and Canal+, has convinced him of the merits of a deal.

The other mooted media tie-up involved United News & Media, 37.5p higher to 745.5p and Carlton, up 3.75p to 554.25p. The two are believed to be in talks over a deal to provide content for ONdigital, which could see United buy a stake in the digital venture between Carlton and Granada, down 12p to 530.5p. A Carlton/United merger was also rumoured.

In the telecoms sector, Energis, up another 214p to a best-ever 2713p, and COLT, 179p up to 2,350p, were seen as targets for the likes of Deutsche Telekom and France Telecom. Others said the rumoured offer could involve an increased bid by Vodafone AirTouch, 20.75p better at 300.25p for German giant Mannesmann.

And finally, banks. The obvious choice for a big deal would be a bid by Royal Bank of Scotland, 26p higher to 1342p for NatWest, up 120p to 1471p, following the regulatory clearance of the bid by Bank of Scotland, up 15.5p to 767p, for NatWest. However, other possibilities included a merger involving Abbey National, 27p better to 1,127p, or even a strike from a domestic or foreign rival for Legal & General, down 1.25p to 178p.

An outside chance of a bid outside the three chosen sectors triggered talk that building materials group Hanson, 11p up at 503p, could have a pop at Australian rival Pioneer. Former Hanson target Blue Circle crumbled 15.5p lower to 335.75p despite whispers of a bid from Mexican rival Cemex.

All this fun and bid games played a big part in the blue-chips roaring performance. The FTSE 100 smashed its July record of 6,620.6 with a 121- point rally to 6,682.8. The leading index also set a new intra-day peak at 6,686.1. The Small Cap followed suit, climbing 7.3 to a new record of 2,862. However, the midcap spoiled the party, stopping some 16 points short of its September high after a 43.5-point rise to 6157.3. Apart from bid talk, the market's rip-roaring rally was fuelled by a bit of pre-millennial window dressing as fund managers started to close books before the end- of-year lull. The closure of the Dow for Thanksgiving also helped by taking away some of the US selling seen in recent days.

The final prop for the FTSE 100 surge was the strength of heavyweight stocks. BP Amoco, London's biggest company, jumped 35p to 642.5p, on the rising crude price, while BT, the third largest constituent, rang up a 55.5p rise to a best-ever 1,305p, after Merrill Lynch raised its target price from 1,300p to 1,500p.

The reborn GEC did its bit, buzzing 91p higher to an 880p peak after sparkling interims. From Tuesday, it will be renamed Marconi and will move to the IT sector. British Aerospace nosedived 31.5p to 383.5p as arbitrageurs switched into GEC ahead of the completion of BAe's purchase of GEC's electronics systems.

Rival Racal Electronics surged 51p to a record 510p after a contract win. Investors await a 167p special dividend and a bid from a foreign predator. Water stocks gushed higher after a softer-than-expected regulatory review. United Utilities climbed 39p to 604p, Thames Water flowed 24.5p higher to 888p and bid target Kelda firmed 20p to 363p. Gas group Centrica rose 12p to 167p after the watchdog said it would remove price controls by 2001.

Retailers had another tough day. Marks & Spencer fell 1.5p as rumours of a toiletries and cosmetics sale outweighed news that long-term bear WestLB Panmure had moved from sell to neutral. Bad results sent clothes chain New Look 16p lower to 135.5p. But supermarket Safeway rose 11p to 179.5p on an upbeat trading statement.

Struggling convenience store chain Alldays firmed 9p to 71.5p on whispers of a bid, possibly from Sainsbury, 8p higher to 316.25p. Vague takeover talk pushed building service group Amey 70p higher to 1,137.5p. Football club Newcastle United firmed 1.5p to 81p on growing takeover talk.

The online music promoter debuted on AIM with a 41.5p rise to 91.5p, while computer group Geo Interactive Media soared 226p to a record 591.5p after the rumoured software deal with Korean giant Samsung arrived.

OFEX-listed videophone maker Motion Media soared 125p to 265p on whispers of a deal with Orange and rumours that investor Trevor Davis had increased its 3 per cent stake. Medical group Aortech rose 42.5p to 512.5p on rumours of a bid from Baxter Healthcare.



GILTS INDEX: 105.96 -0.41

SHAMI AHMED is a busy man. The entrepreneur behind the Joe Bloggs clothes chain is rumoured to be considering taking a stake in PrimeEnt, a TV production company. The stock rose 0.5p to a yearly peak of 3.25p yesterday amid talk of acquisitions or a reverse takeover. And Mr Ahmed is still in talks over buying a holding in marketing minnow 10 Group, while reflective ink producer Reflec, where he has a stake, should be close to a contract win.

KEEP AN eye on Bioscience Innovation, up 10p to 27.5p. The company, quoted on the fringe Ofex market, operates a biotechnology "incubator" near Cambridge where budding biotech companies are provided with office and laboratory facilities. The company said yesterday it had received several applications from potential tenants of the soon-to-be-completed building. Whispers say a series of deals with the pharma majors may be in the offing.