Prices forge ahead as takeover action intensifies

Normal service was resumed on dealing screens across the City yesterday thanks to the strong overnight rally on Wall Street, and yet more hectic action on the takeover front. The market's nervous system, however, has yet to recover from the previous session's dash for the lifeboats by market makers, and dealers are preying that today's inflation figures for September will contain nothing but good news.

Events on Wall Street, though, are largely determining the direction of share prices in London, and there are fears that a poor third quarter company reporting season in America could send the FT-SE 100 index heading south for the winter.

Market-makers took stock of Wall Street's overnight performance, which saw the Dow Jones finish just five points adrift at the end of a day when prices were falling so fast at one time that limits on program trading had to be put into effect.

London prices opened slightly softer yesterday, and then forged ahead as investors digested the latest raft of takeover news involving Lloyds Bank for TSB, North West for Norweb, UUNET Technologies of the US for Unipalm, and Fisons throwing the towel in its fight against Rhone Poulenc.

The FT-SE 100 index closed 14.2 points higher at 3,474.3, having been up at 3,408.9 just before Wall Street opened. The strong tone was evident right through the market, and the FT-SE 250 gained 16.6 to 3,919.8. Volume trading was reasonably good with almost 800 million shares changing hands in more than 31,000 deals.

The appetite for more bids among dealers is insatiable, and the rumour mill about where the action will be is in overdrive. There is hardly a share sector which does not come with several strands of takeover speculation attached.

Gartmore, the fund management group, is the hot favourite soon to be taken under the wings of an adoptive parent from either Germany, the Netherlands or the UK.

Shares climbed 10p to 276p with dealers convinced that the 75 per cent stake owned by Banque Indosuez will be sold for upwards of pounds 400m before the month is out to either NatWest Bank, up 10.5p to 612p, Dresdner Bank or ABN Amro, the Dutch owner of the Hoare Govett firm of stockbrokers.

NatWest's advisers are understood to be burning copious amounts of midnight oil to thrash out a deal, which analysts believe will be a boon for the company and help it compete more effectively against Barclays, 2p firmer at 727p.

Bank shares, which ran up sharply on Monday on the original announcement of the merger between Lloyds and TSB were subjected to some profit-taking. Standard Chartered gave up 5p to 481p, and Royal Bank of Scotland lost 10p to 483p.

The terms of Lloyds deal were well received amid heavy trading. Almost 18 million shares were traded in Lloyds, which climbed 49p to 769p, and more than 26 million were dealt in TSB, up 19p to 369p.

Volume trading in Norweb, up 61p to pounds 11.47, was also high with more than 35.57 million going through the books as North West Water, down 22p to 573p, raided the market for stock after increasing its takeover terms.

North West's raid was very successful. Investors said yes faster than bank managers at the TSB, and North West picked up 25 per cent of Norweb's shares. The company is set to be back in the market this morning in an attempt to take its stake to 29.9 per cent.

Norweb is now recommending the offer, and dealers believe the higher offer will prove too much for the pockets of Texas Energy Partners. The consensus of opinion, however, is that the Americans will continue to strive to own a regional electricity company and London Electricity, which shot up 35p to 898p, is the favourite target. East Midlands, another of the Recs yet to attract a bid, closed 16p better at 877p.

Rumours about GEC, off a penny to 328.5p, bidding for a Rec resurfaced with Yorkshire Electricity, up 16p to 894p, the favourite target.

The market is also waiting for bid action to break out among water utilities, particularly a move soon by Lyonnais des Eaux of France for Northumbrian Water, 5p firmer at 990p.

Unipalm, the centre of a recent storm of anger when it announced that takeover terms would be considerably less than the prevailing 600p market price, added 4p to 414p on an all-share, pounds 97m recommended offer by UUNET.

Shares in BAT Industrieswere again in demand. More than 11.5 million were traded and the price advanced 11p to 544p on talk of a break-up bid. Pearson, also seen as a bid candidate, added 6p to 608p.