Market Report: Tarmac takes high road on bid talk

TARMAC, the building materials and house-building group, rose to within a whisker of its year's high yesterday as the story resurfaced that Minorco, the South African- controlled group, was preparing to mount a takeover bid.

The shares strengthened 7p to 141p. There is a deep suspicion that Tarmac's recovery is gaining pace and any bidder would be unwise to delay any predatory move much longer.

Cazenove, one of Tarmac's stockbrokers, helped to spur the interest. The secretive house, noted for its reluctance to comment on its stock market operations, was said to have increased its profit forecasts. It is thought to have moved to pounds 50m for this year and pounds 100m for next.

Although some forecasts are higher, the Cazenove revisions underline the recovery story.

But Minorco's intentions were the key to the sharebuying. The group has made no secret of its desire to grow in the UK and Europe. Last week the Luxembourg-based operation, which is in effect controlled by the immensley powerful Oppenheimer family, sold its 36 per cent share interest in the Charter Consolidated conglomerate for pounds 235.5m.

Although a strong case can be developed for the cash to be pumped into other parts of the Oppenheimer empire - such as its diamond interests - there remains a lurking hope that Minorco will use its windfall to add to its building materials side.

Before being rocked by the recession Tarmac produced profits nudging pounds 400m and its shares hit 378p. Last year it lost pounds 350.3m. It has been engaged in a disposal programme to reduce interest charges, selling assets worth more than pounds 200m.

The rest of the market was again under the influence of interest rates. The next Bundesbank meeting is on Thursday, provoking the inevitable hope that the Germans will push their rates lower, offering scope for other overseas reductions that could eventually lead to a UK cut.

Government stocks, with sterling making headway, liked the story, scoring gains of up to three-quarters of a point.

Rank Organisation had a good run, improving 16p to 796p as the story that it was planning the sale of its half-share in Xerox, the office equipment group, was resurrected. The US Xerox operation, holding the rest of the capital, is regarded as being more inclined than in the past to buy out Rank.

A Kershaw, controlled by Rank, added 10p to 515p in sympathy.

BAA was another in demand, up 18p at 731p. The airports group is undertaking investment meetings.

Geest, the food group, is another attempting to impress with its investment attractions. Strong on Friday, the shares edged forward 1p to 371p.

But Wellcome had another uneasy session, falling 9p to 688p. Doubts were again cast on the effectiveness of Retrovir, the anti-Aids drug. A new US report suggested that Retrovir should not be used until comparatively late in the treatment programme.

The day's newcomers did well. Environmed, placed at 110p, traded up to 118p, and Metrotect, a producer of anti-corrosive materials for the pipeline industry, reached 139p, closing at 133p. The placing was at 108p.

Abbey National, the banking group, shaded 2p to 408p. Hoare Govett cut its forecast by pounds 30m to pounds 640m. IMI, the engineering group, was another ruffled by a profit downgrading. Carr Kitcat & Aitken cut from pounds 72m to pounds 68m, clipping the shares 5p to 278p.

Tesco, which denied stories of a boardroom rift, edged ahead 0.5p to 215.5p. Asda Group, due to report on Friday, encountered nervous selling, falling 2.5p to 72.5p.

Rothmans International recovered some of its poise as investment meetings to outline the tobacco-luxury goods split took place. The shares rose 12p to 704p. But Dunhill Group, the other half of the revamping exercise, shaded 2p to 381p.

British Aerospace rose 7p to 395p. Hopes that the Taiwanese deal will be successfully funded this week and the prospect of a pounds 360m South Korean Tornado order did the trick.

Ramco Oil Services had a torrid session, falling 31p to 125p. At one time the shares were down to 108p. The uncertainty in Azerbaijan, formerly part of the Soviet Union, caused the damage. The shares have been strong as speculators have contemplated the rich rewards Ramco's Azerbaijan involvement seemed to offer. British Petroleum, with an Azeri exposure, shaded 2p to 303.5p.

Action took place in the normally subdued investment trust world. Panmure Gordon conducted a 6.5 million share agency cross in Witan Investment Trust. The shares rose 2p to 197p, the level at which the cross was completed.

Hong Kong-related shares advanced, reflecting the strength of the colony's market. Cable and Wireless put on 7p to 771p and HSBC, the Hongkong & Shanghai Banking Corporation, 13p to 667p.

William Sinclair tumbled 36p to 196p on the profits warning.

DC Gardner rose 10p to 51p. Reflecting its outplacement activities, it has changed its name to Coutts Consulting. The training division has been sold for pounds 3.7m to Euromoney Publications and the group has terminated a London Docklands lease at a cost of pounds 5m.

Best levels were not held. At one time 16.3 points higher, the FT-SE 100 index ended 9.5 up at 2,897. The FT-SE 250 index reached a new peak, up 10.8 to 3,223.9. Turnover was 500 million shares with 28,432 bargains. The account ends on Friday; settlement is on 12 July.

Birkdale, a collection of advertising, public relations and marketing agencies which used to be called Brunning Group, attracted interest with an agency cross at 11.25p. The shares slipped 0.5p to 12.5p. Birkdale has raised almost pounds 2m through a placing and open offer and has indicated that a significant acquisition is being lined up. Neil McClure, formerly of UBS Securities, is conducting the revamp.

The stockbroker Panmure Gordon expects ML Holdings, the aerospace and electronics group, to swing from an pounds 11.17m loss to a pounds 5.2m profit in the year to next March. With a pounds 14m rights issue slashing gearing from 114 per cent to 60 per cent and a new management getting the group moving forward, the analyst Charles Donald suggests the shares are a buy. They closed at 28p, up 2p.

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