Market Report: Cadbury regains sparkle on talk of Lucozade deal

SPECULATION about takeover bids and deals yesterday helped to alleviate the frustration caused by investors deciding to sit tight ahead of a deluge of economic data from Britain and the US.

Shares in Cadbury Schweppes, weak of late due to the threat from the launch of Virgin cola to its joint venture with Coca-Cola, gained 6p to 444p. The speculative gossip yesterday was that Cadbury was about to pay pounds 400m for the Lucozade drinks business owned by SmithKline Beecham.

Cadbury is said to be keen to make an acquisition to help overcome the disappointment of failing to obtain a seat on the board of Dr Pepper, the US soft drinks group which also produces Seven-Up and in which it has a 26 per cent stake.

Volume trading in Cadbury was reasonable. Nearly 2 million shares went through. A similar amount were turned over in SmithKline, just 0.5p firmer at 435p ahead of today's release of third-quarter figures.

NatWest Securities predicts that SmithKline's third-quarter pre-tax profits will rise 3 per cent to pounds 285m, but expects the dividend to be increased by 18 per cent as in the first two periods.

Cadbury and SmithKline were not the only companies in the top 100 surrounded by takeover talk. British Aerospace, which last week rolled out an agreed bid for VSEL and yesterday set the takeover clock ticking by releasing its offer document, found itself on the end of a rumour.

The talk was that GEC, which is looking over the numbers itself for VSEL, was also running the slide-rule over BAe.

GEC, up 2p to 295p, has long harboured ambitions to buy BAe, ahead 28p to 498p.

That movement in BAe's shares took the value of its all- paper bid for VSEL to pounds 13.68 - the first time the value of the offer has exceeded the market price of VSEL, down 2p to pounds 13.23.

Trading in BAe shares was brisk at 5.9 million. Fewer than a million VSEL shares were dealt.

Aerostructures Hamble, severely mauled by two profit warnings, was also in the takeover frame. The price rose 9p to 33p with GKN, 4p better at 610p, the favoured suitor.

Lack of firm news to support recent bid speculation, however, saw Alfred McAlpine lose 9p to 208p. Amec, the hotly tipped predator, firmed 2p to 104p despite going ex-dividend.

Away from the takeover gossip genuine business was thin. Fewer than 460 million shares went through the books. There were less than 24,000 trades.

The FT-SE 100 index, though, shrugged off Friday's hangover and finished 13.5 points higher at 3,120.2 despite the disadvantage of several stocks going ex-dividend, which collectively accounted for three index points.

Investors, though, sat tight awaiting today's start of a batch of economic news that will continue to tip into the market throughout the rest of the week.

Today's economic mailbag will include the CBI distributive trade survey and public sector borrowing requirement figures for September.

Overall, market sentiment benefited from the re-election of Chancellor Kohl in Germany. Redland, the building materials group, has a large presence in Germany and its shares closed 5p higher at 484p.

Imperial Chemical Industries also helped to push the index higher with a 25.5p advance to 818p. Hoare Govett and UBS were said to be recommending the shares.

There was also talk that the book-building process for the flotation of EVC International, jointly owned by ICI and Enichem, would start in the next few weeks.

The life insurance sector remained depressed by concern about a possible pounds 2bn compensation bill for the legacy of bad advice on pensions.

Legal & General lost 4p to 447p and Lloyds Abbey Life eased 3p to 335p.

Eurotunnel remained in the dark. First-quarter revenues were way below previous estimates and, despite the group ruling out a further cash call, the units fell 7p to 221p.

Changes in the boardroom had negative implications for Exco International, down 15p to 179p - just 4p above this year's flotation price. A change at the top, however, saw CRH gain 7p to 264p.

On the leisure pitch, Airtours finished 3p better at 455p as it bought its second cruise ship. Bristol Scotts rose 12p to 200p on the latest boardroom dust-up.

Enfrachisement hopes lifted Barr & Wallace Arnold ordinary 18p to 593p and the 'A' 15p to 309p.

Frost Group shares continue to recover following the 18 per cent plunge in the price at the end of last month from 252p to 206p. The price gained 6p to 231p yesterday on talk of a buy recommendation for the UK's largest independent petrol retailer by Credit Lyonnais Laing, the broker. There was also vague gossip that Frost could be subject to a bid from an overseas company.

Biocompatibles has received a shot in the arm for its planned flotation.

UBS, which has no involvement with the company's pounds 35m placing and intermediaries offer, has taken a rather novel step so early in a flotation by pushing out a buy note. Unlike most bio-technology stocks, UBS says Biocompatibles is set to break even in two, rather than the normal five years.

Share prices had a better session. The FT-SE 100 share index closed 13.5 points higher at 3,120.2 and the FT-SE 250 managed a 4.6 advance to 3,548.

Volume trading, though, was low. Fewer than 460 million shares went through the books.

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