Market Report: Vodafone rings up gains in AT&T bid for McCaw

AT&T, the 'Ma Bell' US communications giant, dialled into Vodafone shares with its surprise dollars 12.6bn takeover bid for McCaw Cellular, the American mobile telephone group.

Before the deal was announced Vodafone was drifting aimlessly, down 12p as investors snatched profits after last week's strong performance.

But once the AT&T initiative was known the shares staged a dramatic turnaround in busy trading. At one time up 11p, they closed 9p better at 531p, a year's high.

The stock market believes the absorption of another independent cellular radio group can only enhance Vodafone's attractions and increase the possibility of a takeover strike. The price AT&T is offering should also lift Vodafone's valuation.

US investors have been piling into Vodafone and now have more than 20 per cent of its capital. They regard the shares as cheap on US valuations.

Until AT&T pounced on McCaw, the biggest cellular group in the US, many regarded Vodafone as its most likely target. But its bid for McCaw, seen as being in BT's orbit, could kill any ambitions it may have nursed towards the UK group.

It could, however, stir Cable and Wireless into action, as Vodafone would fit into its Mercury circuit. C&W shares, down 8p at 834p, have been bolstered recently by its control of Hongkong Telecom, the colony's biggest telecommunications business.

BT, ex a 9.45p dividend, scored a notional gain, down 3.5p at 429p. It has 17 per cent of McCaw, translating into a 2 per cent AT&T stake. BT intends to sell the shareholding, worth about pounds 1.5bn.

The rest of the market experienced another see-saw session, seemingly ending 1.8 points lower at 3,008.3. But dividend payments distorted the performance. Fifteen constituents went ex-dividend, wiping 8.7 points from the calculation. The FT-SE 250 index continued its remorseless progress, reaching another peak, up 3.9 at 3,459.4. Turnover, although below the best levels seen last week, was impressive for a run-of-the-mill day deep in the holiday season.

HSBC, the Hongkong & Shanghai Banking Corporation, was one Footsie member to climb to a new peak. Despite a weak banking sector it reflected a strong overnight performance by the Hong Kong market and the shares rose 10p to 766p. Figures are due later this month.

MB Caradon, up 16p at 303p, confirmed talks to buy 'a large part' of RTZ's industrial product operations. RTZ put on 2p to 685p.

Sears, the retail group, lost 2p to 111.5p. NatWest Securities believes the shares, following their recent run, should be sold. Pentos fell 6p to 43p on bearish comment.

Euro Disney dropped 50p to 685p. The parent Walt Disney group denied weekend reports of crisis meetings and rejected speculation that the French theme park, which has performed disappointingly, might close.

Manchester United started the football season with an 8p gain to a peak of 476p.

Spring Ram, the bathrooms and kitchens group, dipped 2p to 62.5p on worries that a pounds 25m loss will be announced for the half-year to the end of June. Marley, with interim figures due tomorrow, edged ahead 1p to 166p. The market expects pounds 12m against pounds 9.7m.

There was renewed talk of a rights issue from BICC, down 16p at 397p. But some housebuilders perked up as an industry body said demand was improving after showing signs of faltering. Prowting advanced 7p to 138p.

Utilities were again strong on yield considerations although best levels were not held. But British Gas suddenly lost some of its confidence, falling 9p to 323.5p as profits were taken ahead of today's report by the Monopolies and Mergers Commission.

Unilever responded to last week's figures with a 20p gain to 1,006p. There was also talk of a new detergent, a gel, which could create an impact.

Transfer Technology, the engineer, had another difficult session, falling 15p to 455p. Market-makers were unwilling to take on much stock with, it was claimed, shares offered in parcels of 25,000 but bid in only 1,000 lots. The shares have fallen 70p in a week.

Campbell & Armstrong, the shopfitter, achieved the day's best performance, up 7p to 20.5p following its return to profits.

Medeva recovered from Friday's shock of US legal action. The shares rose 10.5p to 106p, helped by a surprising and unlikely story of a bid from Glaxo Holdings, up 7.5p at 521.5p.

Whitbread 'A' fell 10p to 499p as competition fears continued to take their toll. Others brewers were flat. But Marston Thompson & Evershed, the Burton-on-Trent group famed for its Pedigree bitter, frothed up 10p to 297p. The shares, a tight market, have risen 21p in a week.

There is talk that the Whitbread interest, about 20 per cent, held through the brewery and its quoted investment company, could be sold. The sale, it is argued, could be the first move in untangling the complex Whitbread empire, which would include enfranchising the low-voting 'A' shares.

The FT-SE 100 index ended 1.8 points lower at 3,008.3 but the FT-SE 250 powered to a new peak of 3,459.4 with a 3.9 gain. Turnover was 603.9 million shares with 37,570 bargains. The account ends on 3 September, with settlement on 13 September. Government stocks drifted.

Aminex, the oil and gas explorer, flared 7.5p to 37.5p as its Russian links were strengthened by the arrival in the boardroom of Alexander Sarukhanov, a petrolum engineer who is a leading light at the Russian Foreign Trade Corporation and president of East West Oil, Aminex's biggest shareholder. RFTC, deeply involved in the Russian oil industry, has taken a 49 per cent stake in East West.

Tadpole Technology's sad decline continued, despite one of those reassuring boardroom messages. The shares fell 19p to 221p (after 218p) as the company said it was 'not aware of any circumstances' for the share slide. In the past week the shares have fallen from 255p. An outstanding new issue success, the shares soared to 364p in keen trading. They were floated at 65p in December.