Market Report: Hongkong Land sticks at 25% of Trafalgar House

HONGKONG LAND has, at least for the time being, settled for a 25.1 per cent shareholding in Trafalgar House, the stretched building, hotel and shipping group.

Yesterday the property group exercised its option to acquire shares from an unidentified stakebuilder, widely believed to be the Swiss Bank Corporation. But instead of lifting its stake to the expected 27 per cent HKL, which picked up the shares three weeks ahead of the deadline, settled for what it described as a 'satisfactory level of shareholding'.

Trafalgar shares ended 0.5p higher at 79.5p after moving to 84p in early trading. The retreat was prompted by the removal of the HKL share support and vague stories that the group will find it difficult to pay the promised dividend for the year to the end of September.

But the dividend story seemed wide of the mark. When it launched a pounds 204.5m rights issue in February Trafalgar signalled it would cut its payment from 6p to 3.25p a share, to be paid from reserves. 'The company has no reason to change its position,' said a Trafalgar spokesman.

Clearly any failure to meet such a dividend undertaking would be a disturbing development that would lead to fierce City criticism.

One suggestion was that the dividend-cut story had arisen because HKL had said it intended to assist Trafalgar by taking scrip dividends, presumably using such a route to build to the indicated 29.9 per cent shareholding.

The rest of the stock market had a lacklustre time, with the Fayed family's sale of its 10.6 per cent interest in the Sears retailing group dominating the session.

It seems the Fayeds sold at 101p to Goldman Sachs, which placed shares with institutions at 102p. It was not clear whether the US investment house had unloaded all the 156 million shares it took on its book.

The Sears deal, which left the shares down 4p at a close of 101p, and the placing of a block of the Slough Estates nil-paid rights, accounted for more than half of the day's total turnover.

At one time the FT-SE 100 share index was up 9.1 points, fuelled by lower interest rate hopes and the strength of the Hong Kong market. But a spate of futures selling, rumoured to be by Cargill, a US group that ranks as one of the world's biggest commodity dealers, unsettled the market and shares drifted uneasily.

Mirror Group Newspapers remained in the takeover spotlight, advancing 4p to 131p. Most analysts believe they are undervalued but the feeling persists that the shares are getting near to the level that would tempt the Maxwell receivers to accept an offer. The shares were floated at 125p.

Thorn EMI improved 9p to 875p with Kleinwort Benson and Carr Kitcat & Aitken making positive noises and Imperial Chemical Industries jumped 24p to 1,167p as US investment house Paine Webber repeated buy advice. Carlton Communications, helped along by SG Warburg, rose 7p to 770p.

Cadbury Schweppes improved 10p to 480p in response to Coca-Cola's 20 per cent first-quarter profit jump. The two have joint ventures.

BOC, however, had a subdued session, falling 16p to 707p. The patent on its Farane anaesthetic gas expired in January and there are fears other producers will snatch much of Farane's market. Some suggest BOC could suffer a pounds 20m profit hit. Bespak continued to suffer from a profit warning by a US group with which it has trading links. The shares fell 31p to 627p.

British Steel, one of the best-performing shares this year, edged ahead 1p to 86p, as it announced its second price increase this year.

Whitbread 'A', reflecting the property devaluation, fell 5p to 459p. Gibbs Mew, on the Panmure Gordon profit estimate, frothed up 34p to 238p. Bid speculation returned to haunt JA Devenish, up 5p to 306p.

Building and related shares improved on the marginally brighter housing outlook. Food retailers, weak recently, rallied, with Argyll Group up 11p to 334p.

Utilities had another uninspiring session with talk of switching into recovery shares.

The FT-SE 100 index fell 4.7 points to 2,842.1 and the FT-SE 250 index lost 8.6 to 3,092.7. Volume was 822 million shares with 26,836 bargains. The account ends tomorrow with settlement on 26 April. Government stocks fell by nearly one point.

NatWest Securities ponder the possibility of Blue Circle Industries, the cement group, selling its waste management operations. It suggests that any deal could produce pounds 75m, with Southern Water and Shanks & McEwan the most likely buyers. BCI could announce the disposal with today's results. NatWest expect profits to have fallen to pounds 96.5m from pounds 140.7m. The shares rose 5.5p to 237.5p.

Stirrings at CRP Leisure, the old PE Kemp Holdings. A consortium has emerged with a 79.97 per cent shareholding, paying just over 0.5p a share compared with a 7.5p suspension price. The group's main subsidiary, the pub refurbisher CR Pursehouse, ran into difficulties last month and CRP said it might seek a refinancing. The consortium includes PA Pashley, Luke Johnson and Alan Milton.