Market Report: Britannic shares soar as merger hopes rise

BRITANNIC was one of the stock market's favourites yesterday, on whispers that the insurer is back on the acquisition trail. The door- to-door life assurer soared 30p to 1,072p in a volatile day for the market.

Buyers were excited by the prospect of a merger or takeover. The hot tip was a tie-up with its beleaguered rival United Assurance, which shot up 12.5p to 499p, although some suggested that Britannic could stalk a smaller mutual insurer.

The received wisdom is that Birmingham-based Britannic needs a deal to boost its growth prospects and wake up its sleepy share price. Over the past two years, the company has lost out to richer competitors in the race for rival life assurer London & Manchester and for the mutual group NPI, and is looking rather lonely in a fast-consolidating sector.

Recently, it also revealed that its figures had been depressed by pension mis-selling provisions and poor investment returns. Britannic could spend up to pounds 2bn without straining its balance sheet. This could be enough to snap up United Assurance, whose market value is around pounds 1.7bn.

However, sceptical watchers pointed out that its quoted rival could be too big a bite for Britannic. The recent change of management at the struggling United could also hinder a merger. If a deal with United proved too difficult, Britannic could use its cash pile to buy a non-quoted rival, using the carrot of a juicy windfall to entice its mutual owners.

The FTSE 100 swung wildly before closing 4.9 higher at 6,406.6, amid a flurry of economic events. The Bank of England's decision to keep rates unchanged paled into insignificance when compared to the vagaries of Wall Street. The US index fell sharply on bearish comments from the Fed chairman Alan Greenspan but managed to rebound before London closed. US and UK bonds were also down and contributed to dampen equities' sentiment.

The smaller indices were largely oblivious to these gyrations. The FTSE 250 ended 33.3 up at 5878.1, while the Small Cap finished 3 up at 2576.2.

Telewest Communications was the blue chip of the day. The cable operator jumped 31.5p to 286p after news that Microsoft is to buy the 29.9 per cent stake held by the US group MediaOne. In the market's view, Bill Gates's Midas touch will work wonders with Telewest.

The rival Cable & Wireless Communications slumped 24.5p to 603.5p as Goldman Sachs took a dim view of its digital TV plans. The former parent Cable & Wireless shed 29.5p to 811p after bidding over pounds 300m for the Japanese telecom group IDC. BSkyB, Wednesday's market darling, lost 28p to 579p as brokers, including Lehman Brothers, picked holes in its digital price war campaign.

Utilities were on fire once again. BG flared 28.25p higher to 382.5p on good first-quarter results. Scottish Power surged 23p ahead to 565p after confirming plans to float or sell its prized Scottish Telecom business.

Poor old Shell rose 26.5p to 470.5p on volume of nearly 70 million shares after better-than-expected numbers. A merger with the French rival Elf is still rumoured. Reuters, soon to take a large stake in Tradepoint, put on 31p to 832p as Investec Henderson Crosthwaite said "strong buy".

Sainsbury rose 10.75p to 420.75p on talk of a sale of the family stake and vague whispers of a merger with Marks & Spencer, down 5.75p to 415.75p. The catering group Compass served up a 20.5p rise to 638.5p, boosted by Goldman Sachs' enthusiasm, but the insurer Royal & Sun was the worst performing blue-chip, losing 29.5p to 520.5p after poor results.

TBI, the airport group was the most actively traded mid-cap stock with over 35 million shares changing hands. It settled just 0.50p higher to 91.75p after a two-way pull. Supporters of the stock believe that a big stake is about to be sold, possibly triggering a bid north of 90p. Forthcoming results should also be good.

The instigator of the collapse, Admiral, recovered 100p to 890p as buyers moved in after the storm. FI followed with a 25p rise to 320p, while Logica jumped 19.5p to 560p after an analysts' visit. The aerospace engineer Cobham flew 52.5p higher to 1,020p as Investec said "buy" after a dinner with institutions.

Wimpey, the housebuilder, constructed a 9.5p rise to 179.5p, after an upbeat AGM statement. Lonmin, the old Lonrho, slumped 26.5p to 473.5p on depressed commodities prices, while the old chestnut of bid from Saint Gobain of France sent Pilkington up 1.5p to 80.5p.

There were plenty of bids and bid rumours in the market's outer reaches. The pub group Tom Hoskins was 3.5p higher at 25p after revealing that it had received an approach. The shoe company Oliver Group walked 3p up to 25.5p after chairman Dennis Cassidy said it was in talks over a merger or an acquisition.

Yorkshire Group, the chemical minnow, rose 16p to 126p after a late-afternoon spurt. A Japanese rival is believed to be sniffing around. Bid rumours swirled around the industrial group Wyko, which ended 1.5p better to 107p.

The black-cab maker Manganese Bronze, unchanged at 268.5p, could be the target of a bid. Yesterday, it announced after the market closed that management buyout talks had collapsed.

The Ofex-traded Netbet soared 185p to 415p after the Sky Sports website agreed to carry its on-line betting service. Gladstone, a cash shell, was unchanged at 1.75p as a huge turnover triggered rumours of an impending acquisition.

SEAQ VOLUME: 1.3 billion

SEAQ TRADES: 85,269

GILTS INDEX: 108.73 -0.39

THE EXPLORATION minnow Emerald Energy could produce some positive news in the near term.

The shares were unchanged at 4p yesterday, but there is some talk that Emerald is close to a promising discovery in one of its oil developments in Colombia.

An announcement could be made at, or shortly after, the company's annual meeting in a couple of weeks' time.

ROBOTIC TECHNOLOGY Systems, a manufacturer of robots for industrial use saw an astonishing 2 million shares traded on the junior Ofex market.

The stock closed 2p higher at 317.5p after RTS announced plans to move to the Alternative Investment Market and unveiled positive interims. The rise could also have been triggered by rumours that the company is close to clinching an important deal with a major car maker.