Sun Life mounts late challenge for Footsie membership

MARKET REPORT

Footsie calculations were thrown into eleventh hour confusion as Sun Life and Provincial mounted a late and surprise bid for membership of the exclusive City club.

The insurance group issued 247.56 million shares early yesterday to Axa- UAP, the French insurer, and with the shares climbing 8.5p to a 411.5p peak the company's overall market valuation stretched to pounds 3.3bn, big enough for one of the stock market's elite.

It had been known for some time that Sun Life would issue a block of shares to take over Axa Equity Law & Life for pounds 690m. Shareholders approved the deal in July. But the take over could not been tied up until Sun Life received regulatory approvals; the last came through on Monday, clearing the way for Sun Life to become the major British vehicle for the French giant.

Sun Life's Footsie membership is not jeopardised by the takeover lifting the French stake from 60.2 per cent to 72.4 per cent. The index requirement is that there must be a 25 per cent free float.

The French will sell six million shares in the next six months but the Axa-UAP interest will not be significantly reduced until the year 2000 when it will be cut to 65 per cent. In the meantime the French vote will be 65 per cent.

Such a big shareholding clearly reduces liquidity. With Prudential Corporation holding about 6 per cent the number of "unattached" shares is very low, suggesting the price could romp ahead as index funds scramble to accumulate their intended weighting.

The FTSE steering committee meets today to decide the quarterly Footsie changes, based on yesterday's capitalisations.

Market newcomers Norwich Union, Woolwich and the Billiton mining group are assured of places.

Williams, the fire protection and security group with interim figures today, should also creep into the calculations.

It, too, has made a late challenge. Last week it gave its shares a boost by revealing it was moving from the down-market conglomerate sub-section to a more highly regarded sector. Its interim results, due today, are widely expected to be encouraging, with a 9 per cent gain; there is also talk a share buy back will be announced. The shares, 358.5p a week ago, gained a further 8p to 374.5p.

Williams was unhappy over its Footsie relegation early this year. It was involved in the pounds 1.3bn takeover of Chubb Security which depressed its shares at the time Centrica, demerged from British Gas, was big enough to claim automatic membership.

The expected promotion of five companies means Footsie will experience its biggest upheaval since December, 1995. The five destined to drop out are Hanson, the remnant of Lord Hanson's once feared conglomerate which has been a member since the index was started in 1984, and its one time subsidiary, Imperial Tobacco.

Tate & Lyle, the sugar group, is also doomed. So, it would seem, are Burmah Castrol and Mercury Asset Management, the fund manager.

Footsie's performance yesterday was uninspiring; it fell 34.7 points to 4,950.5 with most retailers lowered by a survey confirming the pace of sales growth was slowing down. Argos, the catalogue stores chain, bucked the trend, gaining 28p to 644.5p following investment meetings.

Reuters, the information provider, led the blue chip leader board with a 19.5p gain to 667p, with UBS offering support. P&O, up 13.5p to 674p, continued to draw strength from Bovis flotation plans.

Guinness frothed up 7p to 562.5p as NatWest Securities drew attention to the disparity which had opened up with planned merger partner Grand Metropolitan, off 4p at 580p. The Guinness price also contains a 4.9p dividend. Matthew Clark, the cider and wine group, sank to a new seven- year low of 225.5p after an uneventful trading statement. Last year's corresponding report, showing the impact of alcopops on cider sales, devastated the shares; they lost a third of their value in one day.

Biocompatiblies International crashed 415p to 732.5p on fears that its proposed link with US giant Johnson & Johnson will not materialise but Compel, a computer group, jumped 34.5p to 235p following a 59.4 per cent profits advance.

La Senza was stripped another 26.5p to 38.5p on increased losses and Burford, the property group, fell 4p to 104p as Nick Leslau stepped down as chief executive.

Tradepoint Financial gained 6.5p to 122.5p, despite the big cuts in Stock Exchange trading charges. Newcomer IS Solutions reached 135.5p from a 134p placing.

Taking Stock

Save, the petrol retailer, was little changed at 88p. It is regarded as a possible target for oil majors but the latest name in the bidding frame is Tesco. Some intriguing buying of Save shares occurred yesterday. Any bid would probably be around 130p.

Little Cambridge Mineral Resources could be on the verge of linking with De Beers, the South African diamond giant. Irish rumours say De Beers wants to forge an alliance with CMR to develop its promising Inishowen prospect in County Donegal. The shares firmed to 12.5p.

Robotic Technology, placed on Ofex at 20p last year, was for a time trading above 100p following more sales and news it has become cash positive. The shares closed up 1p at 95.5p.