Smith & Nephew moves into the takeover target zone

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The stock market is convinced that it has identified the next takeover victim - Smith & Nephew, the healthcare group.

Yesterday every man and his dog seemed to accept the story that on Tuesday the US giant, Johnson & Johnson, would offer 240p a share.

S&N was the best-performing blue chip on the day, jumping 6.5p to 195.5p, a peak, in busy trading.

The Johnson story has intrigued the market for months. Smith has come in for some determined bouts of buying, with the shares performing the classic takeover dance - a surge, a pause for breath and then another surge.

But on a day when corporate action, real and rumoured, dominated the market, Smith was not the only group at the mercy of speculative buying.

With Smith New Court falling to Merrill Lynch, BTR splashing out pounds 2bn for the minority interest in its Australian subsidiary, BTR Nylex, and Thorn EMI confirming its long-suspected demerger, the market could be forgiven for getting bid-happy.

Just to add to the euphoria Northern Electric produced another dazzling giveaway and left the door open for a renewed bid from Trafalgar House, Bass offered pounds 165m for Forte's Harvester pub/restaurant chain and Scottish & Newcastle convinced Whitehall about the merits of its controversial Courage takeover.

The Smith New Court deal left the shares 29p higher at 546p. BTR fell 9p to 322p as the market fretted it had picked an unimaginative target and was offering too much. Nylex rose 33p to 162p. Other conglomerates weakened on the BTR move.

Thorn had a volatile time, 7p firmer at 1,361p after trading up to 1,425p.

Northern jumped 41p to 904p, drawing other electricities higher. Bass rose 2p to 637p and Forte 5p to 256p. Scottish gained 5p to 596p. The SNC deal again directed attention at Hambros, up 3p at 213p, with deals up to 215p. Commerzbank, beaten for SNC, could regard the merchant bank as a consolation prize.

The tendency to mop up minority stakes - Rothmans International and now BTR Nylex - turned thought to Lloyds Abbey Life, the insurance group where Lloyds Bank has 62.2 per cent and has for long been seen as yearning for full control.

LAL and Lloyds are due to announce figures next week, providing, the market hopes, the ideal opportunity to announce bid details.

The insurance group rose 4p to 410p and the bank 7p to 656p.

Other insurances were buoyed by the pounds 527m Sun Life deal, giving control to Union des Assurances des Paris. TransAtlantic, the South African-controlled group which sold its 50 per cent stake, rose 5p to 443p. GRE gained 6p to 214p and Commercial Union 5p to 598p

Zeneca managed an 8p rally to 1,108p and WH Smith attracted another flurry of speculation, gaining 11p to 360p.

Elsewhere SG Warburg, which has already surrendered to Swiss Bank Corporation, dipped 3p to 807p as a large line of stock was placed by Cazenove at around 798p.

Oils were firm, inspired by better-than-expected figures from the US giant, Exxon. British Petroleum gained 5p to 461p and Shell 6p to 755p.

Imperial Chemical industries fell 6.5p to 789p. It is appealing against a $400m US damages award. BT rose 3p to 403.5p on the growing expectation that Oftel will allow increased rentals.

Building and related shares had a firm session on hopes of government help for the hard-pressed housing market. Wolseley gained 12.5p to 399.5p and Berkeley, the up-market housebuilder, 10p to 398p.

P&O shaded another 3p to 575p. Greig Middleton has trimmed its year's forecast by pounds 40m to pounds 337m. It describes the shares as a "weak hold".

Courts, the furniture retailer, added 8p to 758p following the sale of 8 million shares in its Singapore operation for pounds 7.6m. It still has a 51 per cent interest. EW Fact, the tuition group, fell a further 5p to 28p. After the market closed it was reported that the chief executive, Suresh Tanna, had purchased 100,000 shares at 28p. He now has 6.56 per cent.

Prospect Industries, hit by exceptional charges and recording a pounds 11.7m half-year loss, tumbled 3p to 6.5p.

Hall Engineering, up 9p at 198p, is paying pounds 17.3m in cash and shares for SG Industries, a wire goods group which was at one time planning to come to the market. ASW, the steel group, is collecting pounds 4.9m in convertible, deferred shares for a 25 per cent interest it owns in an SG off-shoot. Hall is also raising pounds 2.9m through a share issue.

Acorn Computer firmed 2p to 95p as its associate, Advance Risc Machines, a computer chip maker, fixed up a deal with a big US group, Atmel.