Market Report: US bid rumours put Electronics Boutique into play

THE MARKET plugged into Electronics Boutique yesterday as the videogames retailer was put in play by rumours of US corporate action. Dealers used their computer skills, developed through hours of practice on their Sony Playstations, to click on the "buy" window and send EB more than 4 per cent higher.

At the end of play, the stock was 4p better at 97.5p in respectable turnover of 4.5m shares. The dealing floor's sages believe that EB is set for a major share reshuffle which could pave the way for a bid.

The market's US spies have been told that EB's largest shareholders, a sister company confusingly called Electronics Boutique Inc., is preparing to sell its near 19 per cent stake in the British group.

The Americans built up their holding five years ago when they saved the UK company, then called Rhino, by supporting a rescue rights issue. However, they are believed to have been approached by a US electronics group that is keen to buy into EB following its recent acquisition of competitor Game.

The mooted US buyer might want to go all the way and snap up, Pac-Man- like, the whole of the UK videogame seller at a chunky premium to the current share price. A less popular story suggested that the US shareholder might want to take EB private, hoisting a "Game Over" sign on its life as a public company. On the analytical front, bulls of the stock were buoyed by whispers of a forthcoming "buy" note from broker Merrill Lynch.

The FTSE 100 had no time for games, as profit-taking and a weak Wall Street knocked it off its all-time high. The blue-chip index finished 23.2 below Tuesday's dizzy heights at 6,597.4. Market watchers said an uncertain start in the Dow and a depressed bond market had reinforced the gloomy morning feeling and prevented the big-hitters from improving their record.

The undercard was a much happier place, with the FTSE 250 ending 51.3 better at 6,062.1 - its third lifetime peak in three days and the Small Cap posting a 6.7 rise to 2,703.1.

The ONdigital sisters Granada, up 30p to 662.5p, and Carlton, 25.5 higher at 570p, stole the show among blue-chips. The market expects today's second quarter digital TV numbers to be strong, say 240,000, compared with 110,000 in the first three months. Rival BSkyB shed 11p to 595p.

Fellow media giant Reed International jumped 16p to 478.5p after strong figures from its mooted merger partner, the Dutch publisher Wolters Kluwert. Music group EMI rocked 17.5p higher to 549p after a good flotation of a US Internet business and eternal bid rumours.

Mirror Group moved 1p better to 248p in big turnover amid expectations that an imminent competition report into rival bids from Trinity, down 1p to 560, and RIM will restart the takeover battle.

The aerospace engineer Smiths Industries flew 37.5p higher to 877.5p after broker Warburg said "buy" and slapped a 1,100p price target. Whispers of some interest from the US are starting to circulate. No such luck for Rolls-Royce. The aerospace engine maker nose-dived 9.75p after Boeing chose US rival General Electric for its 777 superjet.

Scottish Power surged to the top of the blue-chip risers after a 28.5p increase to 583.5p. A 1.5m share buyback and hopes of regulatory clearance for its Pacificorp acquisition in the US were behind the move. Rival United Utilities was 27.5p higher to 876p amid continuing bid talk.

Marks & Spencer showed off a 14p rise to 382.5p as the market warmed to its autumn/winter collection. However, sales numbers, due out at next week's AGM, are still expected to be dire.

Shell hit a record 522.25p after rising 7p on hopes of a big acquisition - maybe BG, down 6p to 381p - and good prospects for the oil price.

A Deutsche Bank "strong buy" tip helped computer group Misys to a 21.5p rise to 630.5p, while whispers of corporate action pushed business services giant Hays 24.5p better to 687.5p.

On the other side of the barricade, Royal & Sun lost 20p to 579.5p as broker WestLB Panmure told clients to switch into Norwich Union, up 1p to 443.25p, while Hilton Group checked out an 8p loss to 246p as two sellers dumped large lines of stock. Banks were generally weaker but bid target Bank of Ireland rose 6p to 1175p after a positive trading statement.

Tightly-held Pentland Group, the sportswear specialist, was booted 47.5p higher to 138p by news of a 145p-per-share management buyout offer.

Returning talk of a bid by Wal-Mart pushed Morrison Supermarkets 9.5p higher to 148.5p, while chemical group Laporte jumped 44p to 746.5p on persistent rumours of a bid by Swiss rival Clariant.

Building materials maker Wolseley put on 38.5p to 514p on rumoured forecast upgrades. The management is touring the City and has found analysts in a constructive mood. Electrocomponents buzzed 40p higher to 508p after HSBC said "buy on weakness".

Rail maintenance group Jarvis plummeted 19p to 283.5p after failing to resolve its dispute with Railtrack. Rumours of an emergency board meeting fuelled fears of another profits warning.

Media agency Cordiant jumped 6p to 179.5p on hopes of a bullish trading statement at the forthcoming AGM. Rival Saatchi rose 11p to 242.5p in sympathy. Sector peer ITE soared 8.75p to 55.25p after its two founders resigned and placed their 24.4 per cent stake.

Wallpaper maker Vymura was plastered all over the dealers' screens after 25 per cent shareholder Guild Ventures said it was considering a 110p- per-share offer. The stock rose 10.5p to 104p but after the close Vymura said the offer was "unacceptable".

Construction manager EBC cemented a 13p rise to 90p on rumours of a positive note from a small broker, while rival Bandt firmed 5.5p as the expected bid from Tilbury Douglas, down 4p at 304p, arrived at 53.8p per share. Struggling biotech group Peptide Therapeutics shot 6.5p higher to 49p on vague rumours of a management buyout.

IT consultant Terence Chapman debuted with an 18p rise to 153p, while AIM-listed computer company CRC remained flat at 113.5p, despite completing payments for a pounds 4.4m acquisition of rival AIDL.

JWE Telecom rang up a 11p rise to 98.5p after buying fixed line specialist Advanced Digital Telecom for pounds 750,000.

SEAQ VOLUME 1.28BN

SEAQ TRADES: 79,187

GILTS: 106.13 -0.12

TRADERS ARE expecting some good news at Torotrak, the maker of a revolutionary gearbox.

The shares firmed 2.5p to 205p yesterday amid whispers the company could soon unveil a major contract for its fuel-efficient, user-friendly gearbox with a leading car-maker.

More optimistic punters suggested Torotrak's recent success could lead to a bid, possibly from a German engineering giant.

BAD NEWS is on the cards for UK paper-makers. According to broker Commerzbank, the sector is "not out of the woods". In a note released yesterday, the German bank warns that companies such as Arjo Wiggins, David S Smith, Bunzl and De La Rue, are threatened by falling prices and volumes.

Part of the blame lies with Japanese producers, which have increased volumes and cut prices. Rising raw material prices are also contributing.