Upheaval among financials fuels takeover speculation

MARKET REPORT DEREK PAIN

The stock market is on takeover tenterhooks. The flurry of heavyweight activity on the financial front is provoking intense speculation about the future of leading groups in such areas as banking and insurance.

Many of the top names were dragged into the cauldron yesterday with such blue chips as Commercial Union and General Accident leading the charge.

Prudential Corporation, which has topped Abbey National's offer for Scottish Amicable, rose 10p to 564p while Abbey slipped 17p to 765p. Lehman Brothers, put out a buy recommendation on the Pru, describing its ScotAm bid as "a knock-out offer".

It was, however, a mobile phone group which enjoyed the most spectacular run. Vodafone jumped 20p to 298.5p, a peak, as punters piled in as stories swept the market that a German bid was on its way. A price - 350p a share - was even in the frame.

Not for the first time someone, somewhere got their wires crossed. Whether it was a genuine misdialling or an old fashioned ramp is uncertain.

The story originated in the futures market with heavy trading spilling over to the cash market.

Vodafone denied the bid stories. "I can categorically confirm we have had no takeover approaches", said a spokesman. The shares ended 7p up at 285.5p.

The struggle for ScotAm is only one of the influences creating excitement in the financial sector. The big Morgan Stanley/Dean Witter deal in the US has helped highlight just how fiercely the winds of change are whistling through the once cosy and staid corridors of the financial industry.

The rush to demutalise and the competition in the banking sector, with superstores prepared to challenge the high street clearers, have also drawn attention to the financial upheaval; so has the well signalled continental hunt for a fund management group with Dutch and German predators on the prowl.

CU rose 23p to 718p and GenAcc 24p to 821p. Insurers have in recent years been seen as fodder for continental invaders but after the Royal Insurance/Sun Alliance defensive get together there are suspicions CU and GenAcc could too feel the urge to merge.

BAT Industries, GRE and Legal & General were caught up in the speculation; so was Mercury Asset Management.

The top performing blue chip, however, was not under the takeover whip. Lasmo, the oil group, gushed 11p to 262.5p following a US presentation by Anadarko, one of its partners in an Algerian oil venture. Merrill Lynch added to the fun by joining others on a 300p target for the shares.

British Petroleum was ruffled by rumours it will be dragged into Labour's "windfall" tax; the shares fell 6.5p to 741.5p.

Bass was hit by a sobering profits warning, down 31.5p at 821p. Imperial Chemical Industries' dull profits left the shares off 22p at 742.5p and BT's figures lowered the shares 5.5p to 438.5p.

Overall, the market experienced another lacklustre session with Footsie closing 15.6 points down at 4,265.9. The supporting FTSE 250 index also gave ground.

Sotherby's, the auctioneer, felt the impact of an alleged art smuggling scam, falling 47.5p to 985p. Williams Holdings, the industrial group, added 1p to 327p as ABN Amro Hoare Govett made positive noises. It sees scope for a 20 per cent outperformance as cash realised from disposals is reinvested. RTZ, the miner, enjoyed rumoured support from UBS, gaining 18.5p to 901p.

Chelsea Village was at it again, placing shares. Two more players have taken shares in a placing. In a series of placings the club has now tapped the market for pounds 6.4m. The shares held at 166.5p.

Westmount, with oil interests around the Falkland Islands, jumped 12p to 84.5p and British Borneo Petroleum Syndicate was back to winning ways with a 29.5p gain to 1,333.5p.

PhoneLink, on-line business information services, rose 9.5p to 57p after launching Electronic Market, a joint venture with the Scottish Widows financial group. The venture offers a package using e-mail and deskmail technology. Wedderburn, a property group, gained 4.75p to 18p after disclosing it was in talks which could lead to "substantial" deal.

Paramount, the struggling pubs chain, held at 42.5p. Nomura, the Japanese investment house which is involved in two unquoted pub companies, has acquired 29.05 per cent of the convertibles rights issue which achieved only a modest take-up from shareholders. It already has 9.7 per cent of the ordinary shares.

Taking Stock

rPGA European Tours, a golfing group, edged ahead to 6.5p in busy trading. It recently failed to buy Clubpartners International but did take on one of its courses. Now there is talk PGA has another deal up its sleeve.

rMountcashel, an investment business born out of the old Explaura quarrier, jumped 12p to 112p. It is run by Oliver Vaughan, the former disco entrepreneur. The company concentrates on investing in small businesses and one which has attracted its attention is Shield Diagnostic which enjoyed a spectacular run this week.

rXavier Computer, holding at 11p, is heading for profits of pounds 600,000 this year and pounds 1.1m next, say stockbroker Wise Speke. It believes the shares are attractively rated for an "emerging growth company".