Market Report: EMI steps back into the bid spotlight

TWO long-term takeover candidates were thrust back into the limelight. EMI, the showbiz group, and Safeway, the supermarket chain, enjoyed strong runs in a busy session which ended Footsie's four-day winning run.

EMI was given a 22p spin to 540p on renewed talk of a US strike. There are indications the music group could be vulnerable. It has encountered tough trading, particularly in Asia, which prompted the inevitable profits warning. With boardroom tension evident and the shares under performing in the past year, EMI would struggle to repel a determined assault.

Safeway jumped 24.5p to 385p (after 387p) in busy trading as stories swirled of an Asda strike. Last night only one sell order, 10,000 shares at 390p, was left on the order book against 11 buy trades. But, as with all blue chips, most of the trading was through market-makers.

Asda is known to be keen to swallow Safeway which has issued three profits warnings in little more than a year (and many expect another in a few months).

It has so far held back from bidding because it fears Government opposition. However, it has, it is said, been treading the corridors of power in a bid to press its case.

The Asda story could have been given a push by SBC Warburg which described Safeway shares as a sell on trading fundamentals but drew attention to the speculation which has surrounded the chain since Asda's interest first surfaced. NatWest Securities also contributed by switching its Safeway stance from sell to hold. Asda fell 2.5p to 200p.

Another retail story suggested Next could strike at Storehouse, up 10.5p to 270.5p. Next gained 2.5p to 795p.

There were also suggestions of corporate activity among pharmaceuticals with some traders wondering whether Glaxo Wellcome, off 6p at 1,648p, is ready to launch a hostile strike at SmithKline Beecham, also off 6p, at 738p. Zeneca, figures tomorrow, fell 23p to 2,670p.

Footsie ended 12.9 points off at 5,807.7. The supporting indices, however, were still in record-breaking form with the mid and small caps hitting new highs. It was one of the busiest sessions of the year with more than 1 billion shares traded.

Much of the activity was in Energy Group, as the Americans, PacifiCorp and Texas Utilities, clashed for control. Both raided the market with Energy shares up 32p at 838p.

The bidding war prompted PacifiCorp to pick up 8.8 per cent through Goldman Sachs on Monday and then Merrill Lynch waded in for Texas, putting together a 13.9 per cent parcel at the Texas bid price of 840p a share.

Other power shares were on the blink. What was, in effect, a profit warning from National Power left the shares 31p off at 587p as analysts trimmed their forecasts. PowerGen fell 29p to 803p in sympathy and ScottishPower gave up 16p at 517p.

Halifax retreated 25p to 952p on disappointment with its chosen route, buying its shares in the market, for returning cash to shareholders. There were hopes it would pay a special dividend which would give small shareholders a direct cash benefit. It started the buy-back by picking 4.6 million shares from Merrill Lynch at 961.09p.

Financials were generally weak with Barclays down 34p at 1,796p and Norwich Union, reflecting the failure of any Halifax bid to appear, lost 18p to 505p.

Compass, the contract caterer, hardened 40p to 928p peak after gaining a global catering contract for Philips Electronics. Rentokil Initial, the support services group which has been linked with Compass, gained 9.5p to 320.5p.

BTR's rehabilitation continued with a 5.5p gain to 192.5p and Inchcape added 14p to 226p.

Diageo reached 647p (up 11p) on the escalating valuations put on its up-for-sale Dewar's Scotch whisky operation. PizzaExpress rose 11p to 806p after an investment presentation at Dresdner Kleinwort Benson. Mulberry, a luxury goods group, slumped 20.5p to 37p following another profits warning.

Simon, a business support group, held at 49.5p after ABN Amro placed a line of 5.75 million shares at 49.5p with an institution.

Inspec, a chemical group, ended 17p higher at 224.5p. Profits were up 47 per cent to pounds 47.1m despite sterling's strength. Merrill Lynch moved its stance from neutral to buy.

Sherwood International, an IT group, jumped 82.5p to 690p after producing profits of pounds 3.1m against pounds 2.1m.

Halma, the engineer, rose 6.5p to 113.5p in busy trading. Fibernet gained 13.5p to 215p on the Greig Middleton comment.