Market Report: Footsie finds solace in takeover talk

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A 113-POINT Footsie rebound was accompanied by what had become an endangered stock market species - plain, old-fashioned takeover rumours. Allied Zurich to bid for GRE insurance group and a US strike for Reed International were the pick of the speculation.

It all helped Footsie achieve a comfortable return to above the critical 5,000 level at 5,103.3.

GRE (Guardian Royal Exchange) has, like so many other blue chips, suffered a sharp setback. From a 475p peak earlier this year the shares have crashed to 233.5p. They have displayed a little life in the past week and put on a further 7p to 258p in brisk trading. Any bid would probably be around 350p.

Allied, the financial arm of the old BAT Industries, made a lacklustre stock market debut two weeks ago. At one time the shares were down to 646.5p; yesterday they climbed 34p to 684p. The group takes in the Eagle Star insurance company and the Allied Dunbar financial operation. If it feels the need to strengthen its British insurance side it could decide the time is ripe to pick up an underperformer such as GRE.

The Reed story was bizarre, with even computer behemoth Microsoft dragged into the equation. Somebody got hold of a yarn that Morgan Stanley was working on a huge media deal, and Reed was designated to be the target. An array of computer and media groups were paraded as the possible predator and Reed shares firmed 31.25p to 534.25p in busy trading.

It was very much a Footsie session with the rest of the market lagging behind. The mid cap index did manage a 19.1-point gain to 4,572.2, but the poor old small caps were completely out in the cold again with the index off 1.7 to 2,036, another low for the year.

Analysts' briefings were another influence. Unilever held investment meetings which, if nothing else, steadied nerves and lifted the shares 35.5p to 495.5p. Granada rose 6p to 726p on its Manchester presentation.

There was talk that Cable & Wireless and British Petroleum were meeting researchers, but comments were not necessarily favourable. Merrill Lynch apparently sharply reduced its forecast for Siebe, the engineer, and BT Alex.Brown cut its BPB estimates from pounds 190m to pounds 172m and pounds 210m to pounds 180m. Siebe managed a 9p gain to 189p but BPB fell 16.5p to 231p.

Energis, described by Henderson Crosthwaite as "one of the best strategic players in the UK telecoms industry", jumped 32.5p to 722.5p. Analyst Chris Godsmark says the recent share fall, from a 1,122.5p peak, is a buying opportunity. In a 28-page review, he sees losses coming down from pounds 62m this year to pounds 8.9m in 2000. Last night Henderson hosted an investment dinner for 20 fund managers for Energis at London's Howard Hotel.

Securicor, off 5p at 440p, attracted Lehman Brothers which expects BT, up 43p to 828.5p, to take full control of the Cellnet mobile telephone concern, buying Securicor's 40 per cent stake.

General Electric Co sparked 22p up to 433p after Warburg Dillon Read made positive noises. Shell, after last week's shock, was heavily traded, gaining 9p to 347p as buyers latched on to an 18 per cent discount to Royal Dutch. Imperial Chemical Industries fell 28.5p (after 43p) to 471.5p. There was talk of a large line of stock, anything between 3 million and 13 million, seeking a home.

The withdrawal of Vivendi's attempt to place 4.7 per cent of Telewest Communications unsettled the cable group's shares, lowering them 11p to 144p. Ladbroke, as the probe into its Coral betting shop take over dragged on, retreated 10.75p to 204.25p.

Share trading was swollen by unusual activity in some smaller shares. PDFM, the fund manager, was responsible. In what it described as an "administration move to pool our existing smaller company shares into one fund" it traded around 90 million shares in a fund-to-fund cross. The shares involved include 9.7 million Albert Fisher, 5.8 million Norcros and 5.4 million Brent International.

Lonrho Africa firmed 1p to 62.5p as the consortium related to George Soros continued to nudge its shareholding higher.

Memory Corporation added a further 5p to 21.5p on the BancBoston Robertson Stephens 50p target price. The computer group intends to move from AIM to Easdaq. Wilshaw, the engineer, was at one time up 4.75p to 45p after putting itself up for sale. The shares ended just 1.5p higher at 41.75p.

Vanguard Medica recovered 27.5p to 275p on expectations that it will find a partner for its migraine treatment in the next few weeks. On Monday there were fears that the group was still a long way from clinching a deal.

Longmead, a bathroom accessories group, was the day's big loser, off 36 per cent to 58.5p following a profits warning.

SEAQ VOLUME: 979.7 million


GILT INDEX: 111.56 -0.31

CAR GROUP, the troubled dealer, retreated 2p to a 6p low. The shares touched 221.5p last year after being placed at 138p in 1996.

Last month the company, which declared a pounds 4.8m profit for the year to August 1997, said it was in talks "with a major financial institution" about refinancing stocks, which could lead to a reverse takeover. The market is anxious about the apparent delay in progress.

THERE IS speculation that Northamber's year's figures, due today, could be accompanied by news of corporate action. Shares in the computer assembler shaded 9p to 192.5p.

The chairman, David Phillips, has more than 50 per cent of the capital and one suggestion is that he is involved in talks to sell all or part of his interest. Profits are expected to have moved ahead to around pounds 8.6m against pounds 7.9m.