First Choice rises on takeover rumours

First Choice Holidays, the old Owners Abroad, could soon find itself under attack - just two years after it resisted a hostile offer from rival Airtours.

The shares rose 6p to 122p as stories of bid action mingled with comments from Michael Julien, chairman, that in a flat holiday market the group lifted bookings by 6 per cent.

Behind the takeover rumours is the feeling that the German- owned Thomas Cook, which rushed to the rescue of First Choice, paying up to 150p a share, is growing increasingly disillusioned and has put its 21.4 per cent share holding on the market.

Rank Organisation, Vardon and the US group Carnival Cruises are being touted as the most likely buyers.

Since Westdeutsche Landesbank, owner of Thomas Cook, moved in, its relations with First Choice have appeared strained. At one time it seemed they were not even on speaking terms. A new policy and boardroom changes were introduced to heal the split, but despite First Choice's improved trading performance the suspicion remains that the Germans are far from content.

Airtours, up 2p to 443p, is not thought to harbour any ambitions to return with another bid.

The holiday industry was not the only sector nursing takeover speculation. Defence shares were agog with stories GEC had tired of waiting for the Monopolies and Mergers Commission's decision on its - and British Aerospace's - offer for VSEL, the shipbuilder.

It had decided to pre-empt any ruling, which should appear in the next few weeks, by launching a bid for BAe with a VSEL offer to follow, if cleared by the MMC. The market has for long nursed the suspicion GEC is keen to absorb BAe, and the two have had talks.

BAe, helped by the resolution of the dispute over the Eurofighter, jumped 7p to 491p. GEC rose 1.5p to 304.5p and VSEL 22p to 1,592p, a peak.

The BAe "funny money" rights issue units were busily traded, suggesting they could represent the avenue for a share build-up. They were at one time up 31p at 151p, closing 24p higher at 144p.

Hickson International, the chemical group that emerged as a soap wars casualty, was another to attract bid speculation. The shares rose 7p to 143p. They are now 12p above last month's level, when the group reported a profits fall, dividend cut and the departure of its finance director.

But as the stock market feasted on an array of bid rumours the heat was turned off British Gas, down 3.5p to 296p, as the British Petroleum/Hanson stories evaporated.

The FT-SE 100 index, although off its best, ended above 3,200 points, if only by a whisker, for the first time since September. The closing gain was 10.7 to 3,200.9.

Ibstock Johnsen held at 82p as it confirmed long-running speculation it wanted to buy Tarmac's brick interests. Tarmac edged ahead 0.5p to 113p.

Electricities were bright and waters enjoyed a cheerful run.

Drugs moved ahead with SG Warburg making positive comments. Insurances recovered from bearish comments about their US exposure; Commercial Union improved 12p to 555p.

Nomura favoured HSBC (15 per cent too low at 727p) among banks but Societe Generale Strauss Turnbull alighted on Abbey National, up 7.5p to 484P.

ABN Amro Hoare Govett suggested Shell, down 1.5p at 717.5p, was 10 per cent undervalued. Shaw & Co. pushed Granada down 7p to 555p by suggesting a switch into Pearson, up 11p at 577p.

BSkyB, the satellite television group, gained 6.5p to 258p following its deal with the Frank Warren boxing stable.

Standard Chartered recovered from the Lloyds Bank rebuff, gaining 9p to 294p with Prudential Corporation topping up its stake.

Lloyds gained 9p to 629p with the takeover ambitions of the soon-to-be- acquired Cheltenham & Gloucester Building Society attracting interest.

Johnson Matthey gained 19p to 551p on the platinum price hitting a 4.5 year high.

An upbeat trading statement lifted Watmoughs, the printer, 22p to 390p, but Waste Management dipped 7p to 257p as it emerged Swedish authorities were claiming the company had a £35m tax liability.

Frost, the garage group, rose 11p to 263p, excited by talk Elf may strike. Tesco was also put forward as a candidate to bid.

Christian Salvesen, the distribution group, caught the market on the hop when non-executive director Don Cruickshank, the Oftel director-general, quit. His departure relates to Salvesen's decision to move into the telecommunications business and Chris Masters, managing director, confirmed the group was bidding for a number of contracts. Mr Cruickshank, at Oftel for two years, joined Salvesen last year. Salvesen rose 3p to 248p.

Harrington Kilbride, the hard-pressed book group, doubled to 38p as publisher Ian Fletcher took a 5 per cent stake at 50p a share. He becomes chief executive.

Ross, the consumer group that has also attracted new blood, added 0.75p to 5p.

Speculation continues about Union, the financial group that used to be called Union Discount. A 3.76 oper cent stake in the company has been sold by Magus Fund. There has been talk of a bid but the latest suggestion is the reverse takeover of a stockbroker, possibly the Brown Shipley operation, which is now part of Guinness Peat. The shares slipped 3p to 84p.

Just, the character merchandising group traded on the 4.2 market, has had difficulty with its £1.5m cash-raising exercise, attracting about £1m. But takeover talks have started with what is described as a "substantial" private company operating in a similar trading area. The cash call, and a related takeover, have been shelved. The shares are 3p.

MARKET REPORT

The FT-SE 100 index rose 10.7 points to 3,200.9 and the FT-SE 250 index 14.1 to 3,482.4. Turnover was 754 million shares with 34,134 bargains recorded.