Traders find no cure for Zeneca takeover rumours

MARKET REPORT

The takeover rumours swirling around Zeneca, the giant pharmaceuticals company, show no signs of dying down. Shares yesterday rose another 11p to pounds 11.28p, valuing Zeneca at pounds 10.7bn.

Roche of Switzerland remains the favourite to launch a bid at a price north of pounds 14 a share for Zeneca, which was spun out of ICI two years ago.

The bid rumours have been around for weeks and the sustained strength of Zeneca's share price has led to a general belief that "there's no smoke without fire".

Zeneca's shares traded as low as 675p just over a year ago, and were valued at 600p when the ties with ICI were severed. The rise in the price, however, does owe something to a favourable swing in sentiment to drugs stocks.

Last year's gloomy fears about growth rates have been dispelled, and drug shares have gained some added bid premium following the monster-sized pounds 9bn takeover of Wellcome by Glaxo earlier this year.

A marriage between Roche and Zeneca would, in the eyes of analysts, be undoubtedly a strong one. Zeneca, however, is known to revere its independence and any bid, therefore, would almost certainly involve a hostile move.

The bid rumours have produced one tangential line of thought that Zeneca may erect a defensive barrier by bidding for Fisons. Shares in Fisons, which recently failed to conclude a deal with Medeva, gained 2p to 198p yesterday. Medeva eased 1p to 247p.

Takeover rumours surrounding Hobson, the food manufacturer, also refuse to go away. There were several large delayed trades, including one block of 1.83 million, that registered on the ticker towards the close of dealings.

Total trading in Hobson was just short of 10 million, inclusive of an agency cross of 1.92 million. Hobson's shares trade at 26.5p, and the gossip in the market is that Hillsdown Holdings, up 2p to 196p, is eager to spend some of the pounds 304m banked from the recent sale of its stake in Maple Leaf Foods.

A source said yesterday that Hillsdown was considering a bid pitched at 31p a share. He added, however, that Hobson was likely to value its prospects higher than 31p, which would value the group at pounds 121m.

BICC, the cables company, was also grist for the takeover mill. Shares rose 8p to 322p, amid talk that Siemens of Germany was considering opening its acquisitive cheque book. BICC is worth more than pounds 1.1bn at the current market price.

Besides the speculative gossip, there were hopes in some quarters that positive news on the contract to build the Channel tunnel rail link would soon be announced. BICC is part of one of two consortia that have been shortlisted as bidders for the project.

Generally, the market enjoyed a solid session on the back of the strong overnight performance on Wall Street, where the Dow Jones index climbed 45 points to 4,714.45 - not far short of the all-time high of 4,736.29 hit last week.

In London, the FT-SE 100 index yesterday closed 21.4 points higher at 3,454.3. The FT-SE 250 advanced 10.8 to 3,815.8.

There are a couple of changes to the two leading indexes. Cookson, up 10p to 276.5p, replaces the recently taken-over SG Warburg in the FT-SE 100. Mercury Asset Management, down 2p to 818p, which gained independence from Warburg, joins the FT-SE 250. Volume trading was more respectable, with 630.6 million shares going through the books.

There was a programme trade in early dealings, and the length of the list and the small size of the shares involved suggested that one dealer somewhere in the City had been shown the door.

A clutch of heavyweight corporate results helped to keep the trading wheels oiled. The results were from Reuters, down 19.5p to 536.5p, BAT Industries, ahead 16p to 521p, Lloyds Abbey Life, up 13p to 418p, and BT, off 5.5p to 402.5p.

Investors took a bath on Northumbrian Water, down 63p to 895p, as the Government, on the advice of the Monopolies and Mergers Commission, said it would impose stringent conditions on the planned takeover of the company by Lyonnaise des Eaux of France.

Electricity shares were also easier in the absence of another bid, following Scottish Power's pounds 1bn move this week for Manweb. Scottish Power, up 4p to 315p, bought another 2.69 million shares in Manweb, down 6p to 909p. It now holds 11.5 per cent.

Metro Radio fell 10p to 545p after Emap, up 7p to 478p, launched an agreed pounds 97m take-over bid. The bid terms value each Metro share at 552p.

The latest disaster story from the high street retailers came from QS Holdings, which warned it was losing money and would have to write down stock values. QS dived 34p to 86p.

TAKING STOCK

o Lord Hollick, head of the money-broking to media group, MAI, is said to be looking to sell out of Intrum Justitia, Europe's largest debt collection agency which is well known for its sponsorship of a yacht in the Whitbread Round the World race. MAI has a 19 per cent, pounds 16.5m holding in Intrum, shares in which stand at 74p. Provident Financial, up 2p to 663p, is rumoured to be a likely buyer. MAI rose 3.5p to 269p.

o Stakis firmed 1p to 83p following a two-day round of institutional presentations. There is talk, however that house broker Smith New Court has cut its full year profit forecast from pounds 27.4m to pounds 26.5m due to a fall in trading at the company's casinos. The picture for the company's hotels, however, looks good. Occupancy rates and room charges in provincial hotels continue to recover.