Hanson break-up turns spotlight on conglomerates

Hanson's dramatic four way split dominated the stock market as the search started for other out-of-favour diversified groups which could be tempted to adopt the small is beautiful philosophy.

BTR was the one to immediately capture attention. The shares gained 10.5p to 335.5p in busy trading; Tomkins firmed to 281p and BAT Industries rose 9p to 579p.

Trading in Hanson was frequently hectic with Seaq putting turnover at 114.4 million out of a market volume of 854.2 million. The initial price reaction was a 15.5p jump to 220p, the highest since July. The close was 211.5p, up 7p.

The Hanson split was seen as signalling the end of the conglomerate era. At one time broadly-based groups were highly fashionable creations with their high-flying shares providing devastating take over ammunition.

But in recent years conglomerates have been disappointing investments as they struggled to perform in a market which became more appreciative of the more focused approach.

BTR, like Hanson, has underperformed. Although its recent activities suggest it is still wedded to the conglomerate approach, the market is swinging to the view that it could find itself under irresistible pressure to follow the Hanson example.

Rumours that BAT intends to divide into two - finance and tobacco - have been around for some time. Tomkins, which seems intent on sticking with the conglomerate style, was helped higher by the terms of the take over of US group Gates Rubber.

Take over talk was also in the air. P&O, the building, property and shipping combine, rose 11p to 561p on talk of a bid with the much smaller Wassall, developed by former Hanson executives, put forward as a candidate to bid. But Wassall's pounds 500m capitalisation would seem to rule out a strike at P&O, worth pounds 3.3bn.

Yorkshire Electricity, up 4p to 684p, was back in play on talk a bid was being put together. There were suggestions underwriting was underway ahead of the strike.

At one time Yorkshire was almost everyone's favourite target with Hanson regarded as the most likely to pounce. To the surprise of many it avoided the electrical takeover surge - but the remaining Recs are expected to surrender their independence soon.

Hanson's break up also added sparkle to National Grid, up 12p to 205.5p in busy trading. The split is seen as reducing the possibility that Hanson will sell the Grid stake it inherited with Eastern Group. Deals in 10 million Grid shares at 188p caused surprise; they were clearly agreed before the share advance.

The FT-SE 100 index managed to reverse early falls, closing with a tiny 0.7 points gain. The Hanson move and more heady progress in New York prompted the rethink. The market is convinced interest rates in Germany and the US are about to fall, forcing another UK cut.

Ahead of today's Orange flotation presentation, British Aerospace gained 5p to 890p. Vodafone, off 2p at 230.5p, was unsettled, but Henderson Crosthwaite believes the flotation shows Vodafone to be undervalued, suggesting the shares are worth 290p. Profits this year are seen as emerging pounds 465m with pounds 1bn hit in 1999.

Scottish & Newcastle added 10p to 227p ahead of an analysts' meeting today and Bass, also thought to be about to court researchers, rose 5p to 734p. Allied Domecq was hit by a downgrading from Cazenove, the group's own stockbroker, falling 17p to 512p. The broker is thought to have cut its forecast for next year to pounds 665m against a market average above pounds 700m. Greenalls' elevation to the Footsie lifted the shares 10.5p to 608.5p.

Austin Reed, the clothing retailer, shaded to 177p ahead of rumoured investment meetings and BSkyB improved 7.5p to 406.5p with support from SBC Warburg.

Banks were weak on growing worries about the mortgage rate "war" and the growing conviction some will have to make huge provisions to accommodate Eurotunnel's difficulties.

Quality Software, the accounting group, continued to slide following its profit warning. The shares crashed 135p to 355p a two day fall of 353p, Memory Corporation tumbled 37p to 390p.

Bardon, the aggregates group, edged ahead, reaching 37p in brisk trading. RMC is seen as a likely predator.

SelecTV firmed to 28p on the agreed Pearson offer; World Fluids returned at 4.25p. Stanford Rook, with a TB treatment, fell 49p to 517p as profit takers moved in. The shares were floated on the old 4.2 market at 40p.

TAKING STOCK

rJoseph Lewis, the mysterious Bahamas-based investor, has again increased his shareholding in Christies International, the auctioneer. On Monday he acquired 4.5 million shares, lifting his interest, held through a company called Abel, to 28.73 per cent. Mr Lewis is now close to the shareholding level that triggers a bid. The shares gained 2p to 202p.

rJohn Billington, chairman, has increased his stake in United Energy to 19.37 per cent, buying 1.7 million shares at 11.5p. His purchase is part of UE's acquisition of a 30 per cent interest in Agrigen, which has agreed to supply electricity, produced from poultry litter, to a REC. The company has turned down an $11m offer to settle its US litigation. The shares are 12p.