Southern back in power spotlight

SOUTHERN ELECTRIC, the last of the "dirty dozen" electricity groups to hang on to its independence, was back in the takeover spotlight.

The higher than expected pounds 1.9bn price tag put on East Midlands Electricity by the PowerGen bid had the lights blazing at Southern, sending the shares 26p higher to 555p.

Rumours of takeover strikes have often engulfed Southern since it arrived on the stock market in 1990 when the last government privatised the 12 regional electricity companies. As the other electricity distributors fell to domestic and overseas takeover marauders it seemed to be only a question of time before Southern was absorbed. But, despite a few narrow escapes, the Maidenhead-based group clung to its independence.

Ironically it was the nation's biggest generator, National Power, now seemingly in deep conflict with the Government, which almost captured Southern but its bid was blocked by Westminster.

PowerGen had been expected to pay perhaps pounds 1.7bn, maybe pounds 1.9bn, for East Midlands, which had been taken over by Dominion Resources, the US group. Running a British electricity company has not provided the rewards the Americans anticipated and they seem to have been remarkably receptive to the PG approach.

But domestic growth is only part of the PG strategy. It is in talks with Houston Industries, the US utility, and could be heading for one of those complicated Unilever-style mergers. PG moved ahead 8.5p to 858.5p. Its strike at East Midlands seems to have been so widely leaked that a Stock Exchange probe is inevitable.

NP, resisting attempts to cut back on its gas fired generators, fell 7.5p to 577.5p.

The rest of the stock market endured one of those indifferent sessions when many outside influences are ignored as it concentrates on its in- house considerations - such as the end of the second financial quarter.

Even so it was impossible to shrug off the growing evidence of an economic slowdown and the likelihood that the Monetary Policy Committee will be tempted to increase interest rates. Sentiment was not helped by another steam-rolling performance by sterling with the pound riding above DM3. A strong display by New York failed to make much impression .

Footsie, at one time up 46.5 points, ended just 7.1 higher at 5,884.5. It represented the fifth Footsie gain on the trot. The mid and small cap indices were again subdued, creating the inevitable worry that the bull run in second and third-liners is now history and they are indicating the future direction of the market's blue chips.

British Aerospace led the blue-chip leader board with a 40.5p climb to 469.5p. Hopes that British Airways, 7p higher at 645p, will go to Airbus Industrie for the 100 short-haul jets its seeks prompted the advance. BAe is a member of the Airbus consortium.

BA has often bought Boeing aircraft, never buying from Airbus. It is, however, expected to place an initial order with the European consortium worth around pounds 700m; the full order could be valued at pounds 2.3bn.

Rolls-Royce, which could also expect to benefit, recovered 4.5p to 243.5p.

Compass, the contract caterer, continued to find new peaks. The shares rose 31.5p to 689p with talk of a Rentokil Initial bid still providing much of the impetus.

Tate & Lyle was weak, falling 10p to 480p. Credit Lyonnais did the damage. Analyst Sally Jones said the shares were overvalued and suggested profits this year would emerge at pounds 163m against pounds 241.3m. But she sees returns improving, with profits of pounds 228m next year and then pounds 261.5m.

Standard Chartered, the banking group, remained on wanted lists, gaining 19.5p to 700p. Stories of a Lloyds TSB strike at Alliance & Leicester went the rounds, lifting the former building society 14.5p to 805.5p.

Unilever, the Anglo-Dutch giant, was hit by its removal from Goldman Sachs' global priority list.

Debenhams, the department stores chain, shaded 5.5p to 327p despite Henderson Crosthwaite support; Asda held at 207.75p with Charterhouse Tilney saying buy.

Engineer GKN, showing analysts its German operations, fell back 14p to 781p. The company said profits remained on a rising trend.

Psion's proposed superphone kept the shares buzzing, up 85p to 692.5p. Arm, the computer chip maker expected to be involved in the Psion initiative, added 25p to 1,105p, after 1.125p. The company, which came to market in April, has been elevated to the mid cap index, replacing fine art auctioneer Christie's International which has fallen to a French take over bid. Acorn Computer, with a significant stake in Arm, firmed 3p to 132p.

Building materials group JJ Dyson scored the day's best gain, a remarkable 79 per cent to 380p. Mind you progress was confined to the voting shares. The "A" non-voters held at 93p. As part of a capital restructuring votes are being given to the "A" shares with a compensatory four-for-one bonus handed to the existing voting shares.

John Mansfield, the little timber group, added 1.25p to 8.5p as it confirmed a weekend story it was thinking of bidding for the much bigger Norcros building materials group. Mice, the exhibitions group, also confirmed acquisitive tendencies, buying a couple of businesses.

Murray Financial, the carpet-bagger where John Redwood, the Tory trade and industry spokesman, is a director, made a firm start. Placed at 10p the shares touched 12.75p, ending at 11.25p. The company aims to persuade societies to demutalise with its shares offered as payment.

SEAQ VOLUME: 860.8m

SEAQ TRADES: 65,305

GILTS INDEX: 104.78 -0.10

WEEKS, an engineering and environmental consultancy group, shaded 0.25p to 4p after profits of pounds 809,000, down from pounds 911,000. But it could top pounds 1.3m this year. It is growing in Eastern Europe, particularly in Poland.

In this country it is actively spreading its operations from road to rail and is hoping to get involved in the Channel Tunnel Rail Link. The shares were floated at 5p.

BIRKDALE'S pounds 1.6m sale of its marketing businesses to former chairman Kevin Morley was approved by shareholders, despite the late intervention of Photobition, the printing services group. The company now consists of the Brunning advertising agency and remaining directors Andy Moore and Paul Harvey must be on the lookout for acquisitions. The fully listed shares were suspended at 1p; they are expected to start trading on AIM today.