Woolwich jumps on rumours of BoI takeover bid

Market Report
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The Independent Online
BUYERS RUSHED to put their money into the Woolwich yesterday, as dealers picked it out as being the next target in the rapidly-consolidating financial sector.

As the market soared over 2 per cent amid the US interest rates euphoria, the former building society jumped 6.25p to 377.5p on rumours that a merger or takeover is a very real possibility.

The Woolwich shares have been heavily sold after touching an all-time high of 429.25p last month as the company appeared to have been left out of the merger wave sweeping the sector.

However, market watchers believe that the price fall has attracted the attention of a few rivals.

Bank of Ireland, up 14.5p to 1,080.5p was tipped as a potential predator.

The rumour was lent some credibility by whispers that some of the Woolwich's top executives had been seen lunching with the BoI's top echelon in a plush Dublin restaurant a few weeks ago.

From a strategic viewpoint, the deal makes sense. BoI is keen to boost its UK operations, following the acrimonious collapse of its merger with Alliance & Leicester. A tie-up with a UK mortgage specialist such as the Woolwich, to create a group with a market value of some pounds 12.3bn, would be a good way to expand outside the Irish market.

Other potential Woolwich predators could include the Halifax, up 13p to 770p and the cash-rich Lloyds TSB, up 18.5p to 878.5p.

Sector peers were pushed higher by takeover talk and a CSFB sector upgrade.

Alliance & Leicester closed up 16.5p to 873p as another share repurchase reinforced speculation that a deal could be close.

Northern Rock, another mooted target for one of the big boys, firmed 22p to 500p while bid chestnut Perpetual was 165p higher at 3645p.

Royal & Sun firmed 4.5p to 573.5p amid talk of a cash-and-share bid from rival CGU, up 4.5p to 921p.

The financials' strength was a fitting backdrop for the sharp rise in the blue chips. The FTSE 100 galloped 170.4 ahead to 6,488.9 as the US Federal Reserve's decision to hike rates by only a quarter point and move to a neutral bias unleashed a wave of buying. The bulls were firmly in control from the opening bell and propelled the index to its seventh-biggest point jump of its life and the largest advance since mid-January.

Market strategists talked of a predictable knee-jerk reaction to the Dow's overnight rise and said that the next few sessions will determine whether this leap is a one-day wonder or the beginning of a chunky rally.

The second liners were more subdued, with the FTSE 250 finishing 39.2 better at 5897.4 and the Small Cap ending 12.9 up at 2663.5.

The clothes group Arcadia was on show, amid strong rumours that its purchase of a large portion of Sears is very close. Shares in the Dorothy Perkins and Top Shop group closed unchanged at 212.5p despite speculation that it is poised to announce the pounds 200m purchase of the Wallis, Warehouse, Miss Selfridge and Richards chains from Sears owner Philip Green.

Anglian Water was also the talk of the City. The utility sloshed 12.5p higher to 713p amid whispers that US giant Texas Utilities is having a look.

The day's other big takeover story involved Reed International. The downtrodden magazine group rose 24.5p to 447.75p - after touching a 4-year-low - as bargain hunters bought in the hope of a merger with Dutch rival Wolters Kluwert.

Rival Emap put on 37p to 1,147p after confirming The Independent's story that it had bought Wagadon the privately-owned publisher of Arena and The Face.

In the non-bid zone, Dixons soared 101p to 1,286p as investors rushed in before the flotation of Freeserve, its web service. The strength of hi-tech stocks in the US - where the Nasdaq index hit a record on Wednesday - also helped. Software groups Misys, up 34p to 577p, Sema, 28p higher at 640p and Logica, 36.5p better at 701.5p, also benefited.

Microchip designer ARM Holdings buzzed 60p higher to 789p amid rumours that a major contract, possibly with Texas Instruments, is near.

Computacenter logged on to a 25p rise to 512.5p after the pounds 1.9m purchase of a IT equipment recycler from rival Datrontech, down 1p to 19p.

ICI jumped 37.5p to 664.5p as Goldman Sachs went bullish, while Glaxo Wellcome, up 89p to 1,852p, and SmitKline Beecham, 39.5p better at 864p, were boosted by rehashed merger talks and the improving outlook for the industry.

BT rang a 51p rise to 1,114p after confirming a pounds 217m acquisition of a US e-commerce company CDS and good subscriber numbers from BT Cellnet. Orange was 17p better at 947p on good customer figures and the unveiling of new products. Ofex-listed Motion Media, up 5p to 85p, could benefit from Orange's push into videophones.

Cable &Wireless lost 14.5p to 794p as the One2One figures did not impress, while Vodafone Airtouch firmed 26p to 1276p as index funds bought.

Shell jumped 22.5p to 498.25p after a rally in the oil price and a CSFB push. Rumoured partner BG shed 9.25p to 378.25p as merger hopes receded. Better Brent pushed BP Amoco 40p higher to 1177p.

Punters piled into housebuilders Redrow, 13p better at 231.5p, and Persimonn, 8p higher at 262.5p. The whisper is that acquisitions-hungry Berkeley, up 3p to 764p after Merrill Lynch upgraded, could strike. Cement-maker Rugby firmed 2.5p on vague talk of a management buy-out.

Somerfield slumped 23.5p to 274p as brokers slashed forecasts after bad results.

Among the minnows, PR agency Lopex spun 11p higher to 78p on rumours of a bid from larger rival Incepta, up 0.5p to 38.5p.

Under-bid bookmaker Surrey Group firmed 0.5p to 2.5p. The predator could be an internet company.

Just Group licensed its Jellabies characters in the US for $2.5m and rose 0.5p to 5.25p. Bad results sent software group Total System 9p lower at 42.5p while rumours of a boardrooom bust-up and an imminent profit warning pushed financial minnow London Forfaiting 2p lower to 53p.



GILTS INDEX: 106.76 +0.10