Whitbread set to serve aces in acquisitions contest

MARKET REPORT

Whitbread looks set to put behind it the double fault of failing to buy the Courage brewing business and the Chef & Brewer pub chains with two successive acquisitions of David Lloyd Leisure and 16 Marriott hotels. A City source said yesterday that both deals could be announced next week

The two purchases together could cost more than pounds 350m. Analysts reckon that the Lloyd tennis and fitness centre business will cost about pounds 164m and the Marriott hotels up to pounds 200m.

David Lloyd, the former Davis Cup tennis player, declined to elaborate on Wednesday's statement that his comp any was in bid talks. Whitbread also refused to comment.

Whitbread, one of the largest brewers and pub operators in the UK, would have little problem in funding the purchases. The company's balance sheet sports less than pounds 100m of debt on shareholders' funds of more than pounds 2bn.

Shares in Lloyd hit another all-time high yesterday, climbing 11p to 335p with the market scenting that a deal was close. Analysts believe Whitbread, down 3p to 630p, will have to pay up to 350p to secure Mr Lloyd's agreement. He has a 10 per cent stake.

There is an outside chance, however, that Rank Organisation, which is sitting on more than pounds 600m of cash, could invoke an auction for Lloyd. First Leisure, unchanged at 324p, is another possible suitor. Rank shares were also steady at 430p.

Whitbread, however, apparently has the negotiating field for the Marriott hotels to itself. Negotiations are said to be taking place with Scott's Hospitality, the Toronto-based owner of the franchise to the Marriott hotels.

For the rest of the market yesterday it was time to take stock, or rather take profits on shares that have reached all-time highs. The FT-SE 100 index lost 24.3 of the previous day's 50-point surge, closing at 3,475.6.

The day's business was cast in stone by a disappointing overnight performance on Wall Street. The Dow Jones index, which looked comfortably poised to beat its all-time high of 4,736.29, turned south in the last 30 minutes of trading and finished 10.22 points lower at 4,690.15.

Trading in London yesterday, however, was reasonably steady, helped along by results from several corporate heavyweights. They included Zeneca, which disappointed and fell 22p to pounds 10.98, and TI, which received a favourable response from investors and rose 5p to 424p.

Guardian Royal Exchange also reported and rose 6p to 224p. Analysts said the results were good, and the figures provided a fillip for the rest of the composite insurance sector. Commercial Union added 8p to 625p, General Accident improved 7p to 627p, and Royal Insurance firmed 3p to 332p.

While the leading shares had a bad day, the second-liners had a steady session with prices buoyed by several more rounds of bid speculation filtering through to the market. Wessex Water, up 17p to 353p, is rumoured to be in the acquisitive sights of Waste Management, steady at 324p. Speculation centred on a likely bid price of 380p a share.

Welsh Water moved up 12p to 748p, Severn Trent added 5p to 616p, and Anglian firmed 2p to 568p as stockbrokers Credit Lyonnais Laing recommended buying the shares

London Electricity climbed another 15p to 789p, making a two-day gain of 44p, on increased speculation that the US-based Pacific Light & Gas utility was about to make an aggressive takeover move.

Construction and building material companies were void of rumours and suffered further from concerns about the UK housing market, and Wednesday's announcement from Tarmac that it was quitting housebuilding.

Redland, the big supplier of roof tiles, fared particularly badly even though the outlook for its large operations in Germany look favourable. Shares closed at a fresh year's low, falling 9p to 398p. Almost 2 million were traded.

Sentiment was further dampened yesterday with the National Housebuilding Council reporting that new housing starts so far this year were 14 per cent lower than a year ago. Nationwide Building Society said house prices last month were 1 per cent down compared with a year ago, which confirms recent findings by the Halifax.

Among financials, Gartmore closed 5.5p higher at 201p on some talk that Banque IndoSuez may sell its 75 per cent stake. Pittard Garner, the leather and tanning company, was a feature, adding 2p to 57p amid talk it was about to sell several million pounds worth of property.

TAKING STOCK

oMarket-makers at BZW made a swift pounds 220,000 profit by handling Peel Holdings' disposal of its entire 8 per cent stake in Mersey Docks and Harbour.

It bought the shares from Charterhouse for 420p each, and placed them with several institutions at 423p. Mersey Docks' share price, buoyed recently by hopes that Peel would make a full bid, fell 15p to 425p. Peel held steady at 278p.

oThere is talk in industry circles that Surrey Group will soon sell up to 25 betting shops for more than pounds 3m to Stanley Leisure as a way of expanding into sports-based leisure operations. Surrey announced a return to the black yesterday, making pre-tax profits of pounds 195,000 in the year to March compared with pounds 292,000 of losses in 1993/94. Shares trade at 1.75p.