Market Report: Market warms to talk of Blue Circle pounds 400m disposal

BLUE CIRCLE heated up a cold market yesterday amid talk of a sale of its boiler and radiator business.

The cement giant put together a solid performance, rising more than 5 per cent as dealers warmed to the idea of a pounds 400m-plus disposal of the heating division. The rumours left the stock 22.25p higher at 450.75p with more than 4m shares traded.

The heating operations, which include well-know brands such as Potterton and Myson, have long been seen as a disposal candidate as it does not fit with the rest of Blue Circle's heavy building materials businesses.

But according to dealing room whispers the new chief executive, Rick Haythornthwaite, is putting the finishing touches to the sale, possibly to a foreign rival. Optimistic dealers said an announcement could come at the interims in a fortnight's time, but cooler heads said the end of the month was a more realistic target.

Some Blue Circle bears went even further and suggested that the disposal of the boilers subsidiary, which last year had profits of pounds 50m, could net even more of the expected pounds 400m.

The story was given an extra edge by talk that the company could use the proceeds to expand into Asia or even to merge with rival Hanson, up 1.5p to 530.5p.

Remaining blue chips had a see-sawing session as sentiment continued to be dampened by fears of an interest rate hike in the United States.

After all its swings and roundabouts, the FTSE 100 settled just 29.8 higher at 6,276.2 despite a 100-point rise in the Dow. Turnover was a hefty 1bn but it was artificially boosted by some strange deals in the likes of Hilton and GUS.

The hotel group, up 4.25p to 242p, saw a huge line of 50m shares traded well below the market price. The trade could have been a tax-minimising "bed & breakfast" deal or some dividend-related buying. Dividend trades were also behind a line of 9m shares pushed through in GUS, 0.5p higher to 627.5p.

On a less technical note, Woolwich jumped 13.75p to 350p on old-fashioned bid talk. Bank of Scotland, down 0.5p to 775p, was mooted as a possible bidder.

The TV and hotels group Granada beamed 23.5p higher to 579p amid rumours that it might add to its 9.9 per cent stake in Liverpool Football Club with other soccer buys. Less imaginative souls said that the shares had just rebounded from recent weakness.

BSkyB, up 2p to 591p, has just bought a holding in Leeds Sporting and could follow it up with other purchases.

TV producer Chrysalis flew 27.5p higher to a record 865p. There is talk that the group will benefit from a large stake in an Internet company due to float over the next few months.

Engineer Invensys soared 17.75p to 335.25p as investors reacted to a recent bullish note from Goldman Sachs and to on-going share buybacks. Rumours of large disposals were also heard.

Rival GKN was 38p better to 991p after SG upgraded to "strong buy" and targeted 1,250p.

Continuing corporate action talk kept the retailers on their toes. Tesco bagged a 6.25p rise to 190.5p amid vague whispers that the supermarket giant might reshuffle its international operations in the wake of the Promodes/Carrefour French deal.

Drink groups were lively. Cadbury Schweppes fizzed 13.75p higher to 406.5p after completing the acquisition ofr Dr Pepper's Texas bottler.

Allied Domecq firmed 20p to 594.5p on continuing talk of a strike from Pernod Ricard. On the negative side, beer group Whitbread poured 26p lower to 833p - the day's worst blue-chip - amid vague fears of tough trading in its pubs in the north.

The other bear story came courtesy of SmithKline Beecham. The drug giant bled 21.5p to 789p amid rumours that its star diabetes drug might have dangerous side effects.

Smaller peer SkyePharma lost 1p to 57.25p after buying a drug delivery kit. Today's results could contain SkyePharma's much-awaited announcement of a drug partnership with a large pharmaceutical group, possibly SB itself.

The undercard had a lively session with the FTSE 250 ending 48 better at 6,065.9 and the Small Cap notching another all-time high after a 4.7 rise to 2,821.3.

Matalan was the mid-cap's star. The highly-rated discount retailer posted a 165p rise to a best ever 1,047.5p as recent talk of buoyant sales were confirmed by stellar interims.

Small stockbroker Walker Crips rose 6.5p to 123p amid speculation that Aberdeen Asset Management has bought a near 3 per cent stake. Aberdeen also has a large chunk of broker Charles Stanley, down 7.5p to 817.5p, and talk of a Stanley/Crips merger did the rounds.

Recruiter Select Appointments rose 151.5p to 1037.5p after agreeing an 1,050p-per-share bid from Dutch rival Vedior. Institutions are thought likely to accept the offer and put their money in rivals Spring Group, up 1p to 138.5p, and PSD, 22.5p better at 500p. They could be the next takeover targets.

Specialty chemicals group Burmah gained 56p to 1,239p on revived talk of a strike from BP Amoco, up 20p to 1175p, after shareholders approved the Arco merger.

RMC jumped 60.5p to 1,080p after ABN Amro said the building materials group is worth 1,400p. Computer group CMG clicked 83p higher to 1,940p after good interims and a bullish statement on the millennium bug.

Today's results by rival Sema, up 13p to 690p, should provide further news on the pre-millennial state of the IT sector.

Software group Lynx plunged 30p to a 12-month nadir of 112.5p after a profit warning.

The sausage skin maker Devro sizzled 5p higher to 133.5p amid talk that next week's results will be spiced up with the sale of the underperforming cellulose division.

Talk of a bid or management buyout was also heard. Utility Cambridge Water gushed 17.5p higher to a record 417.5p on revived talk of a bid, possibly from shareholder Anglian Water, down 16p to 724p.

SEAQ VOLUME: 1.08BN

SEAQ TRADES: 72.581

GILTS INDEX: 106.50 -0.33

KEEP AN eye on Lupus Capital, the old Environmental Property Services, up 1.25p to a record 12.25p.

After selling its property businesses to a management buy-out team, the cash shell could be eyeing a fund-raising exercise to fund acquisitions.

Some institutions, believed to include Schroders, Equitable Life and Sun Life, are thought to be keen to buy Lupus shares at more than 15p.

ML LABS is believed to be close to a couple of major announcements. Punters believe the biotechnology group could soon receive positive news on the US trials of its Aids drug Viraldon.

Other whispers suggest ML is in the final throes of a licensing deal for its Adept drug, used in surgical operations. The shares yesterday shot 6p higher to 158.5p, well below their yearly peak of 197.5p, but if the rumours are to be believed the upside could be considerable.