Market Report: Bullish trading rumours hoist Bunzl higher

THE PAPER and plastic group Bunzl put in a steely performance yesterday as buyers piled in on hopes of corporate news. The much-restructured group soared 26.5p to a 12-month peak of 318p on huge volume of over 8.3m shares. According to the trading floor's rumour mill, Bunzl could issue a bullish trading statement in the short term.

The company, whose interests range from cigarette-filters to vending machine products, is expected to have benefited from buoyant trading in its core businesses and the dealing boys were eager to jump on the bandwagon.

A more intriguing possibility is that Bunzl might have attracted the attention of a predator. Some cunning dealers were arguing that the company's sluggish share price performance might have whetted a rival's appetite.

Bunzl's shares are undoubtedly cheaper than some of its US counterparts and one of the overseas giants might be tempted to take it out.

Valuations of similar companies across the Atlantic are fairly heady, as shown by the recent $12-a-share bid by Georgia-Pacific Corp for Unisource, a Bunzl's US lookalike. If the loss-making Unisource is worth $840m (pounds 525m), how much would a bidder pay for Bunzl, which last year made pounds 113m on sales of nearly pounds 2bn?

The bid theory was given added impetus by the presence of a couple of large trades above the market price, a possible indication that some clever soul was building a stake.

The rest of the market was dull, with the FTSE 100 ending a mere 21.1 higher at 6,451.2, despite some exceedingly good inflation figures. Most big players were sitting tight ahead of today's US consumer price data - a key pointer for the future direction of interest rates. The first day of Royal Ascot curtailed trading, as some of the City's finest minds focused on horses rather than shares. The second liners were also quiet, with the FTSE 250 ending 9.8 better at 5,828.0 and the Small Cap finishing 2.8 higher at 2,612.2.

Hanson, the building materials group, was the best-performing blue-chip, rising 22.5 to 606.5p. The relic of Lord Hanson's empire was excited by renewed talk of a merger with cement-maker Blue Circle, up 9.25 to a yearly peak of 447.5p. However, analysts cautioned about possible competition pitfalls. A more likely reason for Hanson's jump was the expectation of a strong rise in sales at today's trading statement.

Banks were thrown under the spotlight by two research notes. A Dresdner Kleinwort Benson 150-page doorstopper contained an earnings upgrade for Barclays, up 31p at 1851p, and Halifax, 1.5p higher at 817p. DKB's positive comments on the sector propelled Alliance & Leicester 27.5p higher to 894p. The rise came despite whispers that the terms of the merger between A&L and Bank of Ireland are to be tweaked in favour of the Irish outfit.

Broker WestLB Panmure gave Northern Rock, up 3p to 500p, a big push with an upgrade from "hold" to "trading buy". Lloyds TSB, up 19p to 865.5p, was also favoured. Bank of Scotland made its own luck, rising 20p to 862p after reporting an "encouraging" start of 1999.

Standard Chartered shed 17.5p to 1,086p after a large European broker worried about margins in Hong Kong slashed its profit predictions.

Railtrack steamed 36p ahead to 1330p after being awarded contracts to run some London Underground lines. Aerospace engineer Smiths Industries flew 24p higher to 902p after its customer Airbus won several orders at the Paris Air Show. Rolls-Royce also powered 5.5p higher to 283.25p after clinching $843m-worth of business at the French air jamboree.

Scottish Power firmed 11.5p to 570.5p after its shareholders duly approved its takeover of Pacificorp of the US.

Bus group Stagecoach was punctured by profit-takers after the recent purchase of Coach USA and lost 7.75p to 218.5p.

Cable & Wireless rang up a 23.5p fall to 800.5p after Morgan Stanley downgraded. Securicor, figures tomorrow, shed 13.5p to 533 in sympathy.

A Wal-Mart-inspired price war threatened Kingfisher, down 19.5p to 758.5p, Sainsbury's, 8p worse at 364p, and Boots, 12.5p lower at 773.5p. Discount clothes chain Matalan experienced a rare fall, losing 102.5p to 800p on the Wal-Mart threat, just like Morrison Supermaket, 5.5p lower at 159p.

Among the midcappers, Manchester United rebounded 11p to 181.5p after Warburg promoted it to "strong buy", while Bowthorpe buzzed 30p higher to 517.5p after the pounds 288m buy of US telecom products group Netcom. Building materials group Hepworth jumped 11p to 202.5p on vague bid talk and HSBC "buy" advice. Takeover whispers sent paper groups DS Smith 5.5p higher at 147.5p and Arjo Wiggins 9p better at 219p. Cement-maker Rugby firmed 2.5p to 121.5p on revived bid talk.

Biotechnology group Celltech fell 8.5p to 464p after offering around 288p per share to buy rival Chiroscience, up 21p at 280p. Chiroscience chief executive John Padfield left to head up a division of healthcare group Nycomed Amersham, up 20p to 460p.

The minnows were rocked by real and rumoured bids. The troubled engineer Powerscreen surged 20p higher to 191.5p after the expected bid from US group Terex arrived at 195p per share.

The storage specialist Stordata stashed away a 1.25p rise to 3.25p after confirming that it is examining corporate deals. The burger-maker Sims Food rose 6.5p to 65p after agreeing to be gobbled up by rival Global for over pounds 22m. Global, up 0.5p to 24p, bought shares to stave off rival bidder Jourdan, 3p better at 46.25p, and ended up with over 43 per cent of Sims.

Credit group Park was unchanged at 31p despite heavy buying by chairman Peter Johnson. AIM-listed Surgical Innovations, a medical equipment company, was flat at 1.75p although a couple of important deals should be announced soon.

Broker Walker Crips lost 15p to 89.5p after a profit slump, while investment trust Benfield & Rea slipped 6.5p to 99.5p after announcing merger talks with rival Wren, up 8p at 106.5p.

SEAQ VOLUME: 1.07bn

SEAQ TRADES: 64,687

GILTS INDEX: 105.39 -0.41

INFOBANK, the developer of software for electronic commerce, is very close to announcing a major contract with Compaq.

Insiders believe that the AIM-traded company has clinched a deal to sell its e-commerce kit to the US computer giant.

According to the rumours, Compaq will install the products in the offices of a large UK utility. The company will then use the Infobank know-how to buy Compaq products on the net.

BEARISH CLOUDS are gathering over Laura Ashley. Shares in the clothing retailer fell 1p to 12.5p amid talk of problems with its fund- raising exercise. It is raising pounds 24.6m through a rights issue at 13p a share. But the fall suggests investors are not keen. If the issue fails, MUI, the Malaysian conglomerate which is its largest shareholder, will end up with 60 per cent of LA and will be able to raise its stake without making an offer for the company.