Vendome cushioned by talk of a Richemont buy up; MARKET REPORT

Is Richemont, the Swiss holding company controlled by the Rupert family of South Africa, planning to tighten its grip on Vendome Luxury Goods?

Shares of the Cartier and Dunhill group have displayed remarkable resilience, blissfully ignoring profit downgradings.

They climbed 16p to 645p (after 664p) as stories circulated Richemont intended to mop up the 30 per cent it does not already own.

Richemont split the Rothmans International tobacco business and the luxury goods operation into separate companies three years ago.

Two years later it astonished many by bidding pounds 1.6bn for the 39 per cent of Rothmans it did not already own. Now the suspicion is Vendome will suffer the same fate.

The Richemont assault on Rothmans was not the best kept secret and the way Vendome shares have been behaving could suggest inspired buying. The shares (or units as they have been designated) are riding at a peak, almost double the split price. A year ago they were 475p.

Taking out the 30 per cent minority would cost around pounds 1.4bn, a sum well within the grasp of the immensely rich Rupert family.

On yet another day dominated by a flood of excitement in the water sector, Grand Metropolitan, the food and drinks group, again created interest, managing a 5p gain to 446p. Stories persist a dramatic reshaping is near. The group has admitted it has looked at the wisdom of splitting itself into two. The pressure for a revamp could be mounting. Guinness and Seagram, the Canadian group, are rumoured to be looking at the International Distillers & Vintners side and Grandmet, like Thorn EMI, could be encouraged to reconsider the advantages of a harmonious break-up.

The FT-SE 100 index ended 15.5 points higher at 3,775.7 with utilities providing the main inspiration. The not altogether surprising arrival of Southern Electric on the doorstep of its fellow utility, Southern Water, created fresh waves of excitement.

Southern Water jumped 46p (a two day gain of 306p) to 987p but the bidder suffered further anxiety, off 19p at 707p.

Yorkshire Water, at least in share price terms, put its recent humiliation behind it, gaining almost 10 per cent to 758p. Wessex splashed 8.4 per cent higher to 360p and Thames, the biggest of the privatised water companies, jumped 35p to 599p, the best performance by a blue chip. Severn Trent was not far behind, up 34p at 595p.

The market was agog with theories about the next water bid and just what ScottishPower, up 6p at 325p, plans to do. It clearly has the ammunition to outgun SE but could decide that any of the other water companies would meet its needs, hence the upsurge.

SE strengthened its position by moving into the market, picking up almost 10 per cent of SW at 995p a share through Barclays de Zoete Wedd and Merrill Lynch.

Electricities drew some comfort from the frenzy with old takeover candidate Yorkshire Electricity gaining 6p, to 755p.

Other utilities joined the fun. The often attacked British Gas added 7p to 184.5p and BT, reflecting the Morgan Stanley support, added a further 8.5p to 348.5p.

Elsewhere House of Fraser, the stores group, rose 8p to 185p on hopes of an encouraging trading statement today. Allders fell 12p to 194p as the row over its decision to sell its duty free operation to BAA for pounds 130m continued to rage. Swissair has, it seems, offered pounds 145m. The large institutions are voicing their disquiet with PDFM, sitting on 22 per cent, said to be leading the revolt.

The day's newcomers fared well. Prism Rail, the first quoted railway services company since post-War nationalisation, made the sort of upbeat debut which would amaze many of the passengers on its London, Tilbury & Southern line. The shares, placed at 100p, romped to 205p.

Vodafone, up 5p to 258p, was thought to have responded to bullish noises from ANB Amro Hoare Govett and Great Universal Stores added 10p to 669p as share buy back hopes resurfaced.

Stentor, a fledgling Irish telephone group which arrived at 72p a few weeks ago, continued to ring the right numbers, up 10p to 113p. Kalamazoo, a computer and stationery group, rose 28p to 143p on its pounds 21,8m takeover of the European automotive dealer systems of Datapoint.

Carlisle, the property company in the Nigel Wray orbit, fell 1.5p to 21.5p as Dev Pritchard, a founder of the Takare nursing homes chain moved in with the intention of focusing on healthcare. He is investing up to pounds 20.6m.