Sink or swim time for P&O's proposed joint venture

MARKET REPORT

Worries that the Brussels Eurocrats will delay, or possibly sink, the proposed joint venture between P&O and its Dutch rival, Nedlloyd, helped lower the shipping group's shares 27p to 573p.

With the stock market floundering as higher interest rate worries took hold, P&O had to contend with the additional anxiety that its far-reaching deal with Nedlloyd could fail to produce the benefits the market expects.

Lord Sterling, P&O's chairman, has been under intense pressure to rescue the group's flagging shares. As competition has intensified, P&O has underperformed the rest of the market by around 30 per cent in the past five years.

The Dutch deal, linking the containership operations of the two, was seen as offering salvation. The combined group would have a pounds 2.6bn turnover, net assets of pounds 1bn and 112 ships. Cost savings should be extensive. The link is also seen as leading to other joint ventures.

No wonder, then, that P&O's shares responded, cruising from 517p to 607.5p. Brussels could, however, spoil the party and there are signs that, at best, P&O and Nedlloyd are in for a long, hard struggle.

The FT-SE 100 index was drenched in "red Dye", bringing, no doubt, some relief to PDFM fund manager Tony Dye, who is banking on a share crash and chosen cash as his safe haven.

Footsie lost 44.4 points to 3,919.7, destroying any short-term hopes of topping the crucial 4,000. But selling was modest. Turnover was again low and there were suggestions that technical influences following last week's futures expiry made a significant contribution to the rout.

The US authorities are due to meet today and with New York flat there are fears American rates are about to rise. But such a move would be surprising in the midst of a Presidential election campaign and would, presumably, indicate the US economy is bubbling much more than had been generally suspected.

Railtrack, still in its partly paid form, led the small batch of blue chips which made headway. The shares rose 6p to a 294p peak as stories of property revaluations and US stake building continued to excite.

BTR had the dubious distinction of suffering the worst blue chip fall, off 14p at 268.5p. Fellow conglomerate Williams Holdings lost 14p to 344.5p.

BTG, the old British Technology Group, put on another 42.5p to 2,260p and Blenheim, the exhibitions group in takeover talks, added 5.5p to 426.5p.

Wolverhampton & Dudley Breweries, up to 621.5p, was helped along by a more positive stance from NatWest Securities. After a 15 per cent underperformance and with group trading improving, NatWest's Geof Collyer believes the shares have reached a fair rating.

As analysts met Unilever, the shares shaded 7.5p to 1,385p and Northern Foods, with analysts visiting its plants today and tomorrow, was little changed at 200p.

Cable and Wireless was firm at 455.5p on Salomon Brothers' support but in the prevailing negative climate a new buy recommendation from Leham Brothers for Lloyds TSB could not prevent a 6.5p fall to 372p.

Grand Metropolitan, with a trading update expected on Friday, fell 6p to 471.5p with the poor results from Berisford's US catering equipment operations prompting worries about the performance of Burger King, Grand Met's fast-food off-shoot. Berisford slumped 40.5p to 106p.

Suggestions the Rank Organisation is about to descend on the Tom Cobleigh pubs chain lowered the price 11.5p to 439p. Tom Cobleigh gained 1.5p to 234.5p. Pizza Express, the restaurant chain, sizzled 26p higher to 472.5p, largely on bid speculation.

The sale of Alpha Airport's US flight catering side for pounds 6.8m failed to quench stories of bid action. A Canadian group, it is said, is planning to buy Granada's 25 per cent stake and then bid for full control. The shares edged 1p higher to 113p.

Conrad, which lost out to Caspian in the battle for Leeds Utd, scored a 1.25p gain to 5.25p on talk it was in negotiations with other Premiership football clubs, including Nottingham Forest and Sheffield Wednesday.

Helene, the clothing group, managed a 0.5p gain to 7.25p on stories Harold Tillman, who runs a German department store chain, is about to link with the company.

Aegis, the media buyer, held at 64.5p. Talk persists of bid action with the WPP advertising group thought to be interested.

TAKING STOCK

o Silver Shield, a windscreen replacement business, is thought to be edging towards a significant deal which would dramatically enlarge the group, currently with a market valuation of just over pounds 5m. Under the chairman, Neil McClure, ex-UBS, the group intends to expand into vehicle and household areas where there is a strong insurance connection. The idea is to create an operation offering a range of services to insurance companies. Profits should be around pounds 700,000 in its first full year as a quoted business. The shares fell 0.25p to 3.5p.

o Reunion Mining rose 6.5p to 65.5p on director buying and positive noises from Societe Generale Strauss Turnbull. The securities house said: "We value the shares conservatively at three times the current share price."