Storehouse and HoF bid talks cheer a dull day

Market Report

HOUSE OF FRASER and Storehouse, two retailers in trouble, enlivened a dull market with rumours of takeovers.

HoF was the more understated of the two, rising 6p to 92.5p. Turnover was not spectacular but dealers said that some well-informed buyers had started to show an interest. The newcomers are apparently hoping for a bid of up to 150p a share, which would value the struggling chain at around pounds 345m.

The department store group has had a tough time as outdated properties and difficult trading conditions have strangled profits.

HoF's ambitious chief executive, John Coleman, has been trying to get rid of the staid, tweedy image of the chain by introducing racier labels and modern new brands.

His work could now be stopped by a predator. Dealers said that HoF's properties could be a useful acquisition for a cash-rich developer such as British Land, down 11.5p to 510.5p, or Land Securities, down 11.5p to 859p.

A UK rival hungry for space, such as Debenhams, which was down 2.5p to 440.5p or a European player were also mentioned.

Debenhams was also in the frame as a buyer of Storehouse. The Mothercare and BhS group soared 19p to 131p - a near 17-per cent jump- amid strong rumours that an offer is imminent.

After losing its chief executive Keith Edelman, the company is seen as vulnerable to a pounds 500m hostile strike or a break-up bid.

Debenhams aside, rumoured buyers included a European player such as the Swedish giant Hennes & Mauritz or a French chain. On the domestic front, a reverse takeover by Littlewoods, the pools and retail giant, was mooted.

Keeping an eye on the rest of the market yesterday was the financial equivalent of watching paint dry.

The FTSE 100 had a lacklustre day, finishing a mere 18.7 higher at 6,435.4. A robust opening on Wall Street and on the US bond market helped London to reverse early losses but failed to spark any large buying interest as institutions sat tight ahead of next week's US rate decision.

The smaller indices underperformed, with the FTSE 250 ending 25.1 lower at 5867.1 and the Small Cap down a tiny 0.1 to 2651.3.

Among the blue chips, SmithKline Beecham injected a 15p rise into its share price to 830.5p on talk that it might sell its over-the-counter drug unit to Franco-German giant Aventis. Rumours of corporate action at SB reawakened talk of a mega-merger with Glaxo Wellcome, which was up 56p to 1,783p.

With the threat of higher US interest rates looming large, defensive stocks had a field day. BAT led the blue-chip pack, puffing 32.5p higher to 612.5p on its safe-haven qualities and rumours of imminent good news on tobacco litigation .

AB Food, another classic defensive, digested a 19.75p rise to 450.75p. Utilities, a safe-but-dull choice, were in demand. United Utilities surged 23.5p to 764 amid vague talk of an offer. Thames Water, up 27p to 1,031p was well bid, while Pennon, the owner of South West Water, gushed 10p higher to 1,061p on whispers of an overseas takeover.

Vodafone rang a 40p advance to 1,312p after saying that its $56bn merger with Airtouch will be completed on Wednesday. Vodafone's index weighting will increase accordingly and the trackers were out to fill their boots.

Prudential firmed 32p to 904.5p as the market awaits the next deal in the financials, while United News & Media rose 15.5p to 611.5p on revived talk of a sale of the Express newspapers.

Lloyds TSB ended in the red, falling 17.5p to 867.5p on talk that Germany's Allianz or AXA of France could trump its pounds 7bn bid for Scottish Widows. Royal Bank of Scotland ruled itself out of the Widows' chasing and lost 19p to 1349p. Illiquid Schroders shed 27p to 1,310p after private rival Fleming posted bad results. Whitbread poured 33p lower at 1,038p as Punch Taverns launched and advertising blitz in the battle for the pubs owned by Allied Domecq, up 1.5p to 597p.

Beleaguered Reckitt & Colman fell 17p to 725p after losing its research and development director.

Morrison Supermarkets picked up a 6p rise to 143.5p on talk of a strike and a Charterhouse "buy" note. Wal-Mart, believed to keen to expand further after buying Asda or a UK rival, could strike.

A big contract win helped London Bridge Software to a 197.5p jump to a record 2,050p. Bid target Rugby was hammered by savaged downgrades after a meeting with brokers and shed 16.5p to 107.5p, while Psion was hit by an ABN Amro downgrade and fell 57.5p to 792.5p.

Torotrak was an in-form minnow. The stock put on 23p to 195.5p on rumours of a large Japanese deal for its fuel-efficient gearbox. Engineer Whatman rose 105p to 790p after saying it would patent its technology to store DNA.

Magazine group Future Network debuted with a 36.5p rise to 421.5p, while antique dealer Partridge Fine Arts plummeted 10p to 56.5p after bad interims.

SEAQ VOLUME: 973.8M

SEAQ TRADE: 68,653

GILTS INDEX: N/A

TAKEOVER RUMOURS have returned to haunt MSB International. The ITrecruitment firm moved 20p higher to 182.5p yesterday amid talk of an approach by a rival. Carlisle, the service group run by the Tory party treasurer Michael Ashcroft was a name in the frame. The mooted offer could be as high as 300p, valuing MSB - founded by the Crystal Palace boss Mark Goldberg - at around pounds 60m. Mr Goldberg still owns 5 per cent and is known to be keen to sell.

VHE HOLDINGS, a civil engineering tiddler, is attracting some speculative buying. The tightly-held shares rose 4p to 29p yesterday amid whispers that someone is sniffing around. The company specialises in land reclamation and could be a prized target for a waste management group. Some dealers said that Waste Recycling, down 1.5p to 446.5p, could be having a look in an effort to counter rival Shanks & McEwan's recent bid for Caird.

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