Market Report: Traders all in a lather over Unilever/Gillette rumour

UNILEVER was put in the spotlight by whispers of a mega-merger with US rival Gillette. The wild rumour of a gigantic transatlantic link between the two consumer products giants excited the market, but did little to stop a slide in Unilever's shares, down 4.5p to a 12-month low of 464.5p.

The story of a Unilever/ Gillette deal originated in the US, reaching these shores in the afternoon. As soon as London traders got hold of the tale they rushed to the phone and within a few minutes the entire market was debating the rumour.

Supporters of the story said that both Unilever and Gillette need a merger to prop up their ailing fortunes. The Anglo-Dutch maker of Dove soaps, Wall's ice-cream and Calvin Klein cosmetics is still reeling from disappointing third-quarter results that sent the shares to their present bargain-basement level.

Gillette has been dogged by similar problems. In June analysts were forced to slash forecasts after the razor-maker issued a surprise profit warning due to poor sales at its Braun electronics division.

A merger with Unilever could be the answer to Gillette's problems, as it would create a multibillion pound washing-up liquid to perfumes giant capable of taking on Procter & Gamble.

However, cynics dismissed the story as a desperate attempt by a Gillette or a Unilever shareholder to get rid of a line of stock and said unfounded rumours of a deal had been heard before.

The rest of the market closed slightly higher, but it was a close shave. The FTSE 100 rose 11.5 points to 6,447 as Wall Street recovered from an 80-point opening tumble. The Dow was unsettled by producer price figures that appeared to increase the chances of a US rate hike next week. However, by the London close New York had trimmed its losses, helped by a good Nasdaq showing.

The FTSE 100's saving grace was again the strength of some big sectors, such as telecoms. Mobile operator Orange jumped 55p to 1,635p amid rumours that its German suitor Mannesmann could be bought. Vodafone AirTouch, down 1.75p to 320.75p, is the old favourite, but new rumours suggest that US giant MCI WorldCom could pip it to the post.

Colt Telecom surged 214p to a record 2,162p after broker Salomon said it is worth pounds 30. Recurring bid rumours also helped. BT rang up a 31p rise to 1,147p as Deutsche Bank and CSFB pushed it ahead of today's interims.

The market's turnover - a massive 1.6 billion - was swollen by nearly 150 million shares in newly-floated Thus. The telecoms operator, floated at 310p, touched 395p before closing at 335p. Parent Scottish Power was left behind and fell 20.5p to 566.5p.

Satellite TV operator BSkyB beamed 20p higher to 647p amid whispers that German pay-TV rival Kirch is buying a stake in the market.

Insurer Prudential bucked a weak financial sector with a 28.5p rise to a 1,006p all-time high amid vague whispers of a bid or acquisition. A large institution was said to have switched from Lloyds TSB, 22p lower to 820p, into the Pru.

Lloyds and rivals Bank of Scotland, 24.5p down to 732p, Woolwich, 5.75p lower to 349.75p and National Westminster, 27p down to 1,415p, were undone by fears that a competition probe into the BoS/NatWest deal could halt consolidation.

Marks & Spencer lost another 4.5p to 272.5p - a five year low - amid reports of a sell-off by US shareholders. Rival Kingfisher jumped 8.5p to 651.5p after a Belgian acquisition, while confirmation of a profits warning sent supermarket Somerfield 22.25p lower to 94p.

The second-liners had a lively day, with the FTSE 250 ending 19.2 points higher at 5851.5 and the Small Cap rising 9.9 to 2729.6.

Media agency Aegis, 10p higher to a record 170p, hogged the limelight. Rumours of a bid from the US or the UK rival WPP, 9p lower to 750.5p, triggered massive buying. ABN Amro was said to have put through over 40 million shares - about 4 per cent of the company's capital.

Oil driller British Borneo flared 16.5p better to 174p on whispers of a bid or an oil find. Rival Enterprise Oil, 33p higher to 495p, and Lasmo, up 9.25p to 139.25p, were excited by rumours of a bid from Italian behemoth ENI.

Software group Merant soared 26p to 282.5p on the Nasdaq rally and vague takeover speculation. The US strength also helped rivals Sage, 355p better at a record 3855p, and Sema, up 41p to a best-ever 944.5p.

Good results from one-time suitor Kuoni lifted travel group First Choice 9p higher to 117.5p, while rival Thomson Travel firmed 1.5p to 87.5p on rehashed takeover talk.

AIM-listed shell Media Content jumped 1.5p to 4.5p. Rumours suggest that Mike Edelson - the "shell king" who launched star-studded Knutsford, 15.5p higher to 241.5p, could repeat the trick. Inventions group BTG soared 21p a best-ever 507.5p on whispers that Monday's figures will be excellent.

Property tiddler Newport was flat at 125.5p. After the close, hostile bidder Trefick agreed to sell its 29.9 per cent stake in Newport to Anglo Scandinavian Investments for 150p. Trefick's offer should lapse today.

Hardware group BATM soared 480p to 4,187.5p. It is expected to announce today that is fundraising offer has been heavily oversubscribed.

SEAQ VOLUME: 1.61bn

SEAQ TRADES: 100,145

GILTS INDEX: 107.14 -0.23

f.guerrera@independent.co.uk

THE SOFTWARE specialist Staffware should be logging on to some good news soon. The shares jumped 80p to a 12-month high of 385p yesterday amid rumours of positive developments. Dealers said it had won a couple of big contracts with large clients. More optimistic punters are muttering that a bid north of 450p could be on its way. The whispers should prop up Staffware's depressed shares, which have fallen from a peak of 945p.

THE BUSINESS services group Semple Cochrane is being chased by a few knowledgeable punters. The shares rose 11p to 338.5p yesterday amid whispers of two major contract wins. According to the rumours Semple could soon announce deals with a major telecommunications group and a rail operator. Semple's stock was also boosted by rumours that a larger rival could take advantage of the company's undervalued shares to launch a strike.