And unlikely as a BTR bid for GEC may seem, it is no more outlandish than the stories
going round City bars in 1991 that BTR would bid for ailing engineering group Hawker Siddeley. But then it did.
On 18 September 1991, Hawker shares jumped 14p to 606p ahead of half-year results that were expected to be no better than dull. And, in spite of a 14 per cent fall in those profits, the next day the shares jumped a further 38p.
Chris Avery, of Smith New Court, observed: 'The share price is not connected to recovery and fundamentals. Bid speculation is the key.' The next day BTR struck with a pounds 1.5bn hostile bid, worth 758p.
The most spectacular recent case of rumours rewarded was Enterprise Oil's ultimately abortive bid this year for its rival oil explorer, Lasmo. Graham Hearne, Enterprise's chairman and chief executive, was flushed out after the City takeover panel expressed concern that the speculation was creating a false market in Lasmo shares.
The panel forced Enterprise to make a statement in April, after Lasmo shares jumped by one-third in the wake of a pounds 219m rights issue.
The Financial Times had noted on 21 April that Lasmo shares had suddenly moved sharply higher the previous day as word spread that someone had taken out a big call option at a price that implied the buyer expected a further substantial rise.
New York arbitrageurs, or speculators, were believed to have amassed one-fifth of Lasmo shares in anticipation of action. They were not disappointed. By the time Enterprise came clean on 27 April, the price had leapt to 167p, way above the 153p that Enterprise was contemplating.
'Some of the speculation looked extraordinarily well-informed,' said Mr Hearne, reportedly on the verge of losing his temper at his public humiliation as he formally unveiled his offer.
He added bitterly: 'The panel is supposed to have
spoken to other possible bidders. But they don't seem to have ordered them to show their hand, as they did with us.' But the cat was out of the bag and those who chased the rumour cashed in in a big way.
And a few weeks before Enterprise was flushed out, shrewd investors made a killing in shares of Hogg Group, the insurance broker. In January the chairman, Anthony Howland, brought the stock market up short with an announcement that there would be a 28 per cent fall in profits for 1993. That sent the shares plunging by 22p to 130p, but they suspiciously recovered half of that by the weekend.
Two months later HSBC Holdings, the international group that owns Midland Bank, said it had bought 6 per cent of Hogg's shares, sending the price up 24p to 165p on hopes of a full-scale bid. Within days, HSBC was revealed as having made a preliminary takeover approach. However, Inchcape snatched the prize three weeks late with a pounds 176m offer - worth a very useful 255p a share.
The Enterprise bid for Lasmo was not the first Lasmo deal to be leaked. The tables had been turned on Lasmo three years previously when speculators correctly second- guessed the group's pounds 1.2bn bid for Ultramar. By September 1991 Ultramar was at its nadir. Turfed out of the FT-SE 100 index, it reported a first-half loss of pounds 21.6m. The shares duly slid to 239p for a fall of 15 per cent in less than three weeks. The high had been 358p.
But on 9 October the
Evening Standard detected what it called 'some nosy buying', taking the price up to 258p in strong volume. The following day it caught fire, surging to 272p ahead of an analyst's trip to see Ultramar's California operations.
The price briefly slipped to 259p before advancing to 277p on more heavy trading. British Petroleum, British Gas, Lasmo, Elf and BHP were all tipped as potential bidders.
At last, on 17 October, Lasmo showed its hand - a one-for-one share exchange valuing Ultramar shares at 312p compared with a speculation-inflated market price of 347p. But the shares stayed over 340p as the battle intensified over the succeeding weeks, providing timely investors with a really worthwhile pre-Christmas profit.
If anything distinguishes these accurate rumours from the wilder sort, it is a definite move in the share price, followed rapidly by a bid as the bidder moves in before the price becomes too inflated. The rest just go stale.
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