Market Report: Buyers book into First Choice bidding frenzy

BUYERS BOOKED into First Choice yesterday as bid rumours flew around the holiday group. The stock took off nearly 5 per cent, landing 9p higher at 213p.

The dealers who exchanged over 3 million First Choice shares were convinced that the bid frenzy surrounding the company will not go on holiday.

The word in the market is that, following the collapse of bids from British rival Airtours and Swiss group Kuoni, UK and European rivals are eyeing First Choice.

The obvious name on everyone's lips is Airtours, unchanged at 542.5p. The package holiday specialist launched a hostile 229p-per-share bid a few months back, but was halted by a European Union competition probe. In the market's view, if the Eurocrats give the green light then Airtours is odds-on to have another go. However, the EU report is not expected until October and some traders are gambling that a foreign player might sneak in before then. Yesterday's gossip suggested the German giant Preussag could be the Airtours/First Choice party pooper.

The Germans would have a useful springboard for a bid - its 10 per cent stake in First Choice acquired through its recent purchase of Thomas Cook. More importantly, the Teutonic group has cash to spare after raising more than pounds 600m in the money markets for European acquisitions. The sceptics point out that Preussag is believed to be more interested in Kuoni and that a First Choice takeover could fall foul of the Brussels' trust-busters. On the first issue, supporters of a Preussag/First Choice deal argue that the Germans need a foray into the UK as much as expansion in continental Europe. As for the competition problem, bulls of the story believe that a series of watchdog-pleasing disposals would be enough to get the deal through.

The holiday bid bonanza was an appropriate backdrop for a typically volatile summer trading day. The FTSE 100 finished 79.5 points lower at 6,483.7. A weaker Wall Street and uncertainty over Thursday's congressional testimony by the US Federal Reserve chairman Alan Greenspan were blamed for the fall. However, the main culprit was the thin turnover, which exacerbated some of the selling.

The banks sector contributed some 26 points of the FTSE 100 fall amid talk that the Government is to launch an inquiry into the mortgage market. Investors were frightened by rumours that the authorities are soon to publish a consultation paper into lenders' margins. A forthcoming banking sector review could also contain some bad news. Lloyds TSB, down 68p to 844p, and National Westminster, 45p lower at 1336p, were the worst hit. Woolwich, 11.25p down at 376.5p, and Abbey National, 33p worse at 1177p, also suffered. Alliance & Leicester did better and only lost 0.5p to 831p thanks to a push by Williams De Broe ahead of Friday's results. Talk of a merger with Woolwich or Bank of Ireland, up 0.11 euros to 9.22 euros, is still alive.

Reckitt & Colman was also buoyed by rehashed bid speculation and surged 11.5p to 699.5p. Usual suspects Unilever, down 6p to 612.5p, and AB Food, 6.25p lower at 415p, were the mooted predators.

British Aerospace flew against the market to finish 8.25p up at 436.25p on hopes of swift regulatory approval for its Marconi acquisition boosting aircraft orders. Rivals Rolls-Royce, 5p higher at 265.75p, and Smiths Industries, 9.5p better at 877.5p, should also benefit from the airplane boom.

Telecoms were the other sector in favour. A late buying spree sent Colt Telecom to the top of the blue-chip risers' chart with a 33p rise to a best ever 1438p. The group is seen as a bid target for a European group or Energis, up 12p to 1730p.

Cable & Wireless rang up a 12p jump to 827p. The auction of the One2One mobile phone operator is back on, with Deutsche Telekom mooted to be in pole position. Moreover, it has granted the UK group NTL exclusive rights to bid for its Cable & Wireless Communications cable subsidiary. The deal left Telewest on the sidelines and 11.75p lower at 293.75p. CWC lost 6.5p to 725p as the prospect of a takeover war receded. Newcomer Kingston Communications started full-blown dealings with a 15p rise to 340p. Another freshman, the laboratory-equipment maker Hartest, firmed 2.75p to 12.75p.

Dixons lost 2p to 1416p as broker WestLB Panmure advised investors to avoid Freeserve after the float. The publisher United News & Media firmed 5.5p to 639p after Goldman Sachs said it could bid for parts of US magazine giant Ziff-Davis. Smaller rival Scottish Media Group rose 28.5p to 916p amid on-going rumours of a strike from Granada, down 18.5p to 653.5p. Among the losers, BAT was dragged 31p lower to 540p on talk of further US legal setbacks, while ICI plummeted 33.5p to 690.5p on concern over Thursday's figures and disappointment at the reported collapse of the sale of its Acrylics unit.

The FTSE 250 just about escaped the blue chips' rout, closing 6.5 higher at 6,089.9 - another all-time high -- while the Small Cap trod water, ending 1.1 down at 2.745.3.

IT group Admiral, figures next week, led the midcappers' brigade with a 55p rise to 810p thanks to the US techies' overnight advance and vague takeover talk. Wondestock ARM Holdings jumped another 50p to a record 1062.5p on continued rumours of a contract with Texas Instruments.

Chemicals group Burmah soared 50p to 1280p, excited by whispers that BP Amoco, down 24p to 1248p, could buy a large stake, while packaging group Rexam rose 13p to 309p on bid talk.

Food retailer Somerfield shed 7.5p to 220p as HSBC went cautious, while Tesco lost 2.75p to 161.75p, despite increasing its market share lead over Sainsbury's, down 7p to 390.25p.

AIM-listed consultant Beaufort soared 2p to 5.5p after buying a French Internet company. Media agency Holmes & Marchant flashed 2p higher at 15.25p after Lord Chadlington, the founder of PR giant Shandwick, lifted his stake to around 10 per cent.

SEAQ VOLUME: 884.5

SEAQ TRADES: 778,393

GILTS INDEX: 106.62 +0.10

WINCHESTER ENTERTAINMENT's results meetings on Thursday should be a jolly affair.

According to house broker Collins Stewart, the AIM-listed company will announce a rise in profits to around pounds 500,000 from pounds 100,000 a year ago. The main reason for the jump is the success of the Jellabies characters, co-owned with rival Just Group. Winchester has also teamed up with a TV firm to develop a cartoon series based on a kids' song.

INVESTORS LOOKING for exposure to the Greek property market will have the perfect vehicle from next month when leisure group Loyalward floats on the junior Ofex market.

The company's main project is the development of a luxury resort in Crete. Loyalward is raising just pounds 5.1m and plans to meet the pounds 500m cost of the project through joint ventures with other operators. It is in talks with several hotel groups interested in taking stakes.