Market Report: Takeover talk lightens the gloom

TAKEOVER BIDS, real or rumoured, provided much of the action as the stock market again wallowed in seemingly unshakeable gloom.

At one time Footsie was down 111.9 points. In a volatile session it ended 62.7 lower at 5,399.5, the first time it closed below 5,400 since late January.

There were complaints the controversial order book was exaggerating the decline and inhibiting dealing.

Fairey, the engineer, was catapulted into the takeover arena, soaring 55p from its year's low to 339p. There was talk an approach had been made although Fairey refused to comment. The shares took a tumble on Wednesday when HSBC took the shares off its buy list.

The market got hold of a story that Fairey had all but in name been identified in a US telephone conference call.

A cash-rich American group told its executives it intended to bid for a European group. It then went on to describe its target. Among the clues was the proposed victim's share performance - the price had fallen from around 700p to below 300p. Like many engineers, Fairey has been devastated by sterling's strength and its shares have come down from 697p last year.

Southern Electric, the only one of the 12 privatised electricity distributors to retain its independence, was busily traded on renewed talk of corporate action, gaining 11p to 567p. There is, however, some debate whether Southern will emerge as a predator or victim.

It is thought to be keen to flex its muscles but looks vulnerable in the rapidly changing power world.

Booker, where talks are taking place, rose a further 21.5p to 279p. Vaux, the brewer and hotelier, was as flat as yesterday's pint, after denying it had received a bid approach, tumbling 41p to 318.5p. And Waverley Mining fell 3.5p to 9.75p as bid talks ended.

Racal Electronics was another lower - 2.5p to 382.5p. Henderson Crosthwaite suggested General Electric would bid before Racal demerges its telecom side, due next year.

Footsie was again subjected to an order book distortion. This time the victim was Sun Life & Provincial, the insurer. A late order book trade for just 450 shares was punched in at 536p. It was the last order driven trade of the day and therefore became the formal closing price. Before the rogue trade Sun Life had traded at around 500p; indeed there were two trades near 500p after the maverick input.

Until Sun Life's intervention BSkyB, the satellite television station, had led the blue chip winners, reflecting the market's appreciation of its digital packages. The shares rose 18p to 446p. Drug giants Glaxo Wellcome and SmithKline Beecham resisted the retreat, prompting vague thoughts that, just perhaps, their merger was not dead. Glaxo rose 36p to 1,811p and SB 3.5p to 665.5p.

The session was dominated by worries over foreign markets, with the turmoil in Moscow creating considerable anxiety. A Russian devaluation seems inevitable. Such a move would hit the German banks, which have a heavy Russian exposure, and probably lower the mark, creating more problems for Britain's hard pressed exporters.

But investment house BT Alex.Brown is not throwing up its hands in despair. It says: "Investors should now start to buy into the current market fragility and we no longer expect it to under perform the rest of the Europe".

Supporting shares were not spared with the mid cap index off 59.7 at 5,154 and the small cap, down 26.6 to 2,333.1, uncomfortably close to its year's low.

Centrica, the gas group, firmed 2.25p to 90.75p as Panmure Gordon increased its target price from 125p to 140p. EMI, the showbiz group, slipped 2.5p to 463.5p with Sutherlands trimming its profit forecast and saying sell.

BTR, the engineer, attracted late attention. A US predator was said to be stake building and in active trading the shares hardened 1.75p to 157.25p. One name in the frame was US breakup specialists Kohlberg Kravis Roberts.

Business Post, the express parcels and mail delivery group, tumbled 52.5p to 575p on the boardroom changes which include the return of founder Peter Kane as chief executive.

Torotrak, the transmissions group hived off from BTG, continued to experience an unhappy market life. The shares arrived recently at around 300p; they fell 25p to 227.5p despite a little director buying. Antonov, with a revolutionary gearbox, continued its sudden revival, gaining a further 18.5p to 113.5p. Its ninth licensing deal and comments from Credit Lyonnais suggesting a 300p target are behind this week's 35.5p advance.

Huntingdon Life Sciences returned at 13.5p against a 19.5p suspension. Trading was halted while the company put together a pounds 20.2m placing and open offer. The group suffered a pounds 8.4m interim loss.

Oriflame International, the cosmetic group, fell 25p to 320p on worries about its exposure to Russia which accounts for around 15 per cent of its turnover.

SEAQ VOLUME:845.8

SEAQ TRADES: 60,140

GILTS INDEX: n/a

UNION, once the Union Discount Co. of London, firmed 1.5p to 62.5p as aggressive investor Guinness Peat lifted its stake to 9.77 per cent, buying 1.5 million shares. GP has recently caused discomfort to directors of Staveley Industries and family controlled Young & Co's. Brewery. Union ended a 112 year reign as a proud discount house last year; it is now a fund manager and a futures and foreign exchange broker.

The company lost pounds 2.6m last year and pounds 11.9m the year before. Joseph Lewis, the Bahamas-based investor, has a 24 per cent stake; he is said to be a major client of the foreign exchange side. For Sir Ron Brierley, the New Zealand chairman of GP, it is a return to old pastures. When he headed Brierley Investments he put together a 25 per cent Union stake, much of which is now with Mr Lewis.

TAKEOVER development are likely soon at engineer James Dickie. The shares rose 6.5p to 135p on expectations of a deal.