Mirror ahead on talk of German interest

Market Report

TAKEOVER RUMOURS returned to haunt Mirror Group yesterday as blue-chips surged to another record high on the back of a soaring Dow and domestic bid speculation.

The publishing group made the headlines with a 7p advance to 218.5p amid talk, albeit vague, of a renewed interest from the German group Axel Springer. The German publisher approached Mirror with a 240p informal offer last summer but was rebuffed by the then chief executive David Montgomery.

The feisty Ulsterman has since fallen victim to a boardroom scuffle and has been replaced by the former Mirror regional titles boss John Allwood. Dealers are now betting that Axel could exploit the change of management and come back with a bid of around 240-250p, valuing the publisher of the red-top tabloid at around pounds 1.1bn.

The Germans' rekindled interest could trigger a bid war with Trinity and Regional Independent Media, who are also thought to be in the frame. The two regional publishers were rebuffed by the Mirror board in January but still harbour takeover ambitions. PDFM, the activist shareholder, owns 20 per cent of Mirror and traders believe that it would take a serious look at an offer of around 250p.

The rumours about Mirror were not the only takeover whispers to excite the market. The blissful combination of bid talk and a 200-plus advance in New York at the London close left the FTSE 100 index 94.7 points higher at a all-time high of 6,515.3, on a hefty turnover of over 1.4 billion shares.

The undercard was also in record-breaking mood. The FTSE 250 ended 53.2 up to 5849.4, the highest for the year, a feat copied by the Small Cap, which closed 22.5 higher at 2489.6.

Marks & Spencer was high on the speculators' list, amid feverish talk that the legendary investor Warren Buffett is buying the stock. The country's premier retailer displayed a 9.25p rise to 433.25p after a little-known US fund, Brandes Investment Partners, said it had a 3 per cent stake.

The disclosure sparked rumours that "the sage of Omaha" could be behind the purchase, making M&S his UK blue-chip of choice. The Buffett link seems somewhat unlikely, as Brandes revealed that it had bought the shares on behalf of 100 custodian banks. The mystery will soon be revealed as M&S has lodged an official request to find out who is behind Brandes.

The "spot-the-Buffett" game did not stop with M&S. The drinks group Allied Domecq, up 3.5p to 502.5p and Halifax bank, up 13.5p to 918p on the day of the completion of the Birmingham Midshires acquisition, were also popular choices. The Buffett mania spilt over to Diageo, which fizzled 39p higher to 918p. However, the rise was more likely due to an upbeat trading statement by its French rival LVMH and impending news on the sale of its Spanish breweries.

Back in the non-Buffett world, bids, real and imagined, were all the rage. Kingfisher, the DIY-to-Superdrug giant, drilled a 44p drop to 796p after disappointing the City with sketchy details of the pounds 18bn tie-up with Asda. The supermarket group checked out with a 5p drop to 193.75p.

Hopes of a counterbid from the French retailers Carrefour and Promodes or Wal-Mart of the US are still there, but there is also talk that the US retail powerhouse is eyeing Safeway. The chain rose 8p to 268p with a chunky 19.8 million shares traded.

Sainsbury, up 24.75p to 415p, was also dragged into the bid frenzy. Associated British Food was the icing on the food retailers' cake. The maker of Silver Spoon sugar put on a sweet 17.25p to 443.5p after pledging a pounds 448m cash- back. Inchcape, the slimmed-down conglomerate, surged 12.5p to 155p after promising a pounds 530m special dividend. Tomkins, the not-so-slimmed-down conglomerate, lost 3p to 252.5p on huge turnover, after buying back 167 million shares.

The holiday group First Choice travelled 14.5p higher to 190p amid persistent talk that its merger with the Swiss group Kuoni will be trumped by a bid by Airtours, down 10.5p to 488.5p.

AstraZeneca, the drug giant, broke a 13-day duck and rose 32p to 2,611, the first rise since the merged group started trading.

Bid speculation and rumours of a large finding in the Gulf of Mexico supported British Borneo. The oil and gas group flared 20p higher to 172.5p. Fellow explorers were also excited by bid talk and better oil prices. Enterprise Oil gushed 38p higher to 423p, followed by its one-time merger partner Lasmo, 7.75p up to 142p. Aminex, a tiny explorer, rose 1p to 14p on speculation of a large Turkish find.

Granada topped the list of blue-chip risers thanks to an 87p spike to 1,406p. Several late trades above market price were behind the increase. Smiths Industries, the aerospace engineer, flew 51p higher to 1,041p after being included in Lehman Brothers' recommended portfolio. The rival metal- basher IMI dropped out but still rose 13p to 318.5p, helped by investors' new-found love for cyclical stocks.

Vickers also benefited and was hoisted 17p higher to 165.5p after government clearance of the takeover of Ulstein. Large US buyers were said to be moving in, attracted by the company's exposure to the Kosovo war. Invensys, the former BTR Siebe, made its debut with the new name, rising 9.25p to 330.25p.

HSBC was another one to defy Lehman's removal and banked a 28p rise to a 12-month peak of 2,303p, mirroring the all-time high of its Hong Kong- traded shares.

SEAQ VOLUME: 1.49 billion

SEAQ TRADES: 104.540

GILTS INDEX: 110.95 +0.05

THERE IS some talk of corporate activity at Rosebys. The furniture retailer rose a comfortable 13p to 124p yesterday, amid speculation that the management is preparing to take the company private. Traders believe that the buyout could be pitched at around 160p, valuing the company at nearly pounds 60m. Any action is expected after the results, due in a few weeks. Brokers are expecting around pounds 11m, compared with pounds 13m posted in 1998.

GENUS, an Ofex-traded cattle breeding and agricultural consultancy, yesterday made a pounds 20.7m bid for VDC, a distributor of medicines for animals quoted on AIM. The 190p-per-share cash offer, pitched at a 43 per cent premium to VDC share price before takeover talks were announced, has not yet been recommended by the veterinary supply company. VDC's shares, up 20p to 195p yesterday, were below their 142p float price before the start of bid talks.