Market Report: Dairy Farm may plan to harvest Kwik Save

IS DAIRY FARM, the powerful Hong Kong group that has long nursed a threatening shareholding in Kwik Save, the successful discount stores chain, preparing for a takeover strike?

There has been talk that the Hong Kong group, part of the powerful and sprawling Jardine Matheson empire, has been discreetly nudging up its stake. Yesterday it admitted it had acquired 100,000 shares, pushing its holding to 26.03 per cent.

The Dairy Farm involvement is hedged around by various restrictions. One is that its representatives on the Kwik Save board would resign before any bid was launched.

Although the retailer's boardroom has witnessed a number of changes there has so far been no evidence of a mass desertion by the Dairy Farm contingent. But Graeme Seabrook, a Dairy Farm man, is due to quit as chief executive in June.

Mr Seabrook has transformed Kwik Save. He is moving back to Dairy Farm. His replacement, Graeme Bowler, is also a Dairy Farm man.

The impression that Dairy Farm, or Jardine, will eventually mount an assault on Kwik Save was strengthened by the Hongkong & Shanghai Banking Corporation's takeover of Midland Bank.

With the colony's future uncertain there must be a growing desire for other Hong Kong groups to establish their London credentials. Many observers believe Kwik Save's independence will eventually be sacrificed to provide Dairy Farm with a Western domicile. The shares rose 3p to 794p.

The high street banks, due to produce what in many cases will be doleful figures next month, also commanded attention.

Rumours that corporate activity was about to erupt pushed the shares of Standard Chartered and TSB Group higher while the favoured predator, Lloyds Bank, held steady at 499p.

Standard rose 28p to a peak of 630p, TSB 6p to 166p. Hopes that Barclays will after all hold its dividend was responsible for a 19p gain to 397p. An SG Warburg push left National Westminster 10p higher at 415p.

The FT-SE 100 index, after early falls, closed 11.1 points higher at 2,748.7 with rights issue fears still creating uncertainty.

Cash-rich Glaxo Holdings suddenly emerged as a rights candidate with talk of a one-for- five offer at 580p to help finance an overseas acquisition - Astra of Sweden and Warner Lambert of the US were put forward as the most likely targets. Glaxo, as if dismissive of the talk, ended 1p higher at 702p.

Allied-Lyons, the food and drink group, was not so lucky. The shares fell 12p to 590p as rights worries persisted.

Brent Walker and Ladbroke Group rose on the longer betting shop hours. Struggling BW improved 1.75p to 10.5p and Ladbroke 4p to 193p. The other big bookie, brewer Bass, rose 3p to 582p despite worries that Ian Prosser, the chairman, will make a cautious statement at today's shareholders' meeting.

Retailers had to contend with the Whitehall view that festive sales slumped. The figures, however, failed to convince some observers who suggested sales campaigns had distorted the statistics.

Media groups - which could, some believe, be the recovery stocks of the year - attracted attention, with WPP up 6p to 66p. Mirror Group Newspapers rose 5p to 105p.

Downgradings again took their toll. Ibstock Johnsen dropped 6p to 40p as Cazenove was said to have cut. Hays, the business suport group, fell 5.5p to 228.5p as Hoare Govett made bearish noises.

British Steel, spurred by further US buying, rose 4.5p to 64.5p. BAA, the airports group, enjoyed Panmure Gordon support, up 6p to 783p.

Johnson Matthey, the metals group, slipped 4p to 480p. Barrick Resources, the aggressive Canadian group which once attempted to buy Consolidated Gold Fields, is said to be keen to scoop up the 38 per cent shareholding which Charter Consolidated has put on the market.

Mobile telephone shares were unsettled by indications of a price war. Vodafone Group dropped 19p to 388p.

Hunter Saphir, suspended at 36p, expects a takeover bid. A deal with the Glass Glover food group was one suggestion.

After falling 10 points the FT-SE 100 rebounded to finish with an 11.1-point gain at 2,748.7. The FT-SE 250 index ended four points up at 2,889.9. Trading was relatively strong, with volume just failing to reach 600 million shares. Bargains totalled 27,269. Government stocks traded quietly

Rodime, a disk drive computer pioneer which dropped out of production and now gets its income from royalties, is attracting attention. The shares held at 11p yesterday. It is already back in the black, making its first profit since 1985 from royalty payments. But it continues to pursue claims against six leading groups which, if successful, could have a dramatic impact.

Business Expansion Schemes continue to flow as the Government prepares to bring down the axe on these tax-effective exercises. Latest issue comes from the stockbroker Townsley. It is offering shares in Jerry's Home Store, aimed at offering products for kitchens and dining rooms. First branch will be in the Sloane Square area of London. The Marks & Spencer influence looms large. An M&S director, John Sacher, is on the board and two other directors have held top jobs at M&S. Fourth director is Anthony Spitz, with South African retailing experience.

Townsley hopes to raise pounds 1.2m by offering shares at 100p. The broker has undertaken to use its 'reasonable endeavours to match buyers and sellers' of the shares.