MARKET REPORT : US bid for Yorkshire recharges speculators' batteries

The agreed pounds 1.5bn bid for Yorkshire Electricity by two US power groups gave the stock market much-needed support and encouraged talk of further takeover action ahead of the general election.

Yorkshire ended 63.5p higher at 882p on the news, while Southern Electric, the only other remaining independent regional electricity company in England, added 23.5p to 770p.

Shares in Energy Group, newly demerged from the Hanson empire, also gained from positive sentiment towards the utilities sector, adding 43.5p to 568.5p on their first day of trading to top the list of best-performing blue chips. Goldman Sachs has a target price of 590p, while ABN-Amro Hoare Govett is also positive.

Boosted by the Yorkshire bid, the FTSE-250 index closed 10.9 points higher at 4,641.9 while the main FTSE-100 index recovered from a low of 4,316 to close just 5.7 points adrift at 4331.1 with ex-dividend factors accounting for a loss of about seven points.

Hopes of further corporate action encouraged buyers in healthcare group Smith & Nephew, whose shares rose 5.25p to 196p on speculation that Johnson & Johnson of the US was lining up a bid.

Also moving on bid hopes were shares in Arjo Wiggins Appleton, up 11p to 172p on a weekend newspaper report that the struggling Anglo-French paper group had held talks with its South African counterpart, Sappi, about a pounds 2bn merger involving a pounds 500m sale of Arjo's European paper distribution arm to its management.

It would not be the first time the two companies' paths have crossed. Two years Arjo suffered a big blow when Sappi outbid it for SD Warren, the US coated paper producer.

Although the recent talks between Arjo and Sappi reportedly came to nothing, analysts are encouraged to hear that Arjo is looking at ways to improve its strategic position through some form of an asset swap or alliance - Arjo is heavily exposed to the mature carbonless paper market.

Arjo has been rocked by a series of top-level defections since Stephen Walls, chief executive at the time of the 1990 merger between Anglo-American paper group Wiggins Teape Appleton and its French counterpart Arjomari- Prioux, left after the board rejected plans for a merger with Dutch paper group KNP in 1992.

Analysts note that last week's merger between St Louis, Arjo's 40 per cent shareholder with fellow French group Worms, could pave the way for the French to buy out the rest of Arjo that they do not already own. Daniel Melin, the former chief executive of St Louis, yesterday resigned as deputy chairman of Arjo following the St Louis/Worms deal.

United News & Media continued its recent strong run, rising 16.5p to 704p on news that David Arculus, the well-regarded managing director of publishing group Emap, is to become United's chief operating officer with responsibility for consumer publishing, broadcasting, trade magazines and exhibitions. Emap, by contrast, dipped 27p to 785.5p.

Currency concerns weighed on music publisher EMI, off 42p at 1,193p ahead of today's third-quarter figures, while the effects of a strong pound also affected shares in several insurers reporting this week, notably Commercial Union, 7.5p weaker at 701p. Guardian Royal Exchange was hit by sell advice from Societe Generale, ending 1.5p down at 288p.

A two-way pull was seen in Whitbread, 4.5p better at 787p. Goldman Sachs rates the shares a buy but Credit Lyonnais Laing prefers rival brewer Scottish & Newcastle, 12.5p ahead at 687.5p.

CLL sees a period of consolidation for Whitbread after spending pounds 600m in acquisitions over the last 18 months on the likes of David Lloyd Leisure and the Pelican and BrightReasons restaurant chains. The broker also thinks Whitbread, having been the first to identify the huge potential for the UK eating-out market, now has less scope than its peers to improve high- margin food sales from its managed pub outlets such as Brewers Fayre and Beefeater.

Gowrings, an unlikely combination of Ford motor dealerships and Burger King franchises, improved a penny to 106.5p. It is opening five more fast- food restaurants in the first half of this year, bringing the number of Burger King outlets it operates to 21.

Dedicated fans of biotech outfit Stanford Rook were disappointed to hear that data on its tuberculosis drug SRL172 would not be analysed and made available as soon as hoped. The shares collapsed by 105p to 520p.