Market Report: Rapturous reception for Reuters buy-back

INSTITUTIONAL investors are clamouring for the Reuters cash handout. The information group, with an embarrassing cash mountain approaching pounds 900m, is buying back 5.8 per cent of its shares for pounds 350m.

The buy-back, offering enticing tax advantages for institutions, has been rapturously received, with applications for 38.65 per cent of the group's capital.

The success of the buy-back - at 1,400p a share - was a contributing factor in the stock market's contemptuous dismissal of the surprise Bundesbank decision not to lower interest rates, despite intense international and national pressure.

After a volatile session the FT-SE 100 index ended unchanged - a distinction last achieved in October 1989.

It is widely believed that most of the pounds 350m buy-back cash, plus an pounds 87.5m tax benefit, will quickly be reinvested in the market.

Reuters shares celebrated the de facto completion of the exercise with an 8p gain to 1,524p.

The offer, which could encourage other cash-rich groups such as General Electric Co to distribute some of their vast cash hoards, is a windfall for institutions.

Although Reuters is paying 1,400p a share the tax authorities have agreed to split the payment into 1,284 as dividend and 116p as capital, thereby giving rise to a capital gains tax loss.

With the buy-back favouring UK tax-exempt funds, holding 35 per cent of Reuters capital, the success of the offer was never in doubt. Henderson Crosthwaite has estimated that, allowing for the tax element, each share bought by Reuters is worth more than 1,800p for charities, 1,721p for pension funds and 1,560p for life funds.

The market had opened confidently, expecting a Bundesbank rate cut.

Then doubts set in and by the time the no-change decision was flashed on the screens the FT-SE 100 index was down almost 20 points. But then futures buying, apparently led by UBS, prompted an about-turn, with the index again climbing towards its trading peak. With New York uncertain shares again relapsed, leaving the FT-Se index unchanged. Trading was often busy but much of the dealing was inter-market as positions were covered.

US influences were pariticularly evident on some shares. Vodafone again attracted transatlantic buying, improving 7.5p to 577.5p. ShareLink, the execution-only stockbroker, jumped 9p to 345p. Tiphook, the container group, was unchanged at 234p, although Bank of New York ADRs now account for 46.19 per cent of the capital.

Telemetrix rose 18p to 180p, reflecting interest in the shares of its 61 per cent-owned, quoted, US subsidiary.

Carr Kitcat & Aitken added to Kingfisher's woes by suggesting a switch into Marks & Spencer. Kingfisher is feeling the impact of the Do-It-All loss, falling another 4p to 665p. Ladbroke, the other main do-it-yourself group, has the added disadvantage of hovering dividend fears. Interim results are due next week. The shares fell 3p to 202p.

Oils remained firm, supported by the Nigerian uncertainty. British Petroleum rose 3.5p to 321p and Shell 2.5p to 674p. Barclays de Zoete Wedd likes Shell, suggesting a buy up to 730p. Hardy Oil & Gas, up 7p to 171p, scored from Kleinwort Benson and Morgan Stanley interest.

Rank Organisation managed a 3p gain to 777p following an analysts' visit to its holidays side. First Leisure continued to feel the blast of the Cazenove downgrading, falling 11p to 294p.

Bass had to contend with bearish comments from Nomura, down 11p at 511p. But an encouraging shareholders' meeting strengthened Scottish & Newcastle, up 9p to 482p, a two-day gain of 18p.

An investment meeting, thought to be at Credit Lyonnais Laing, encouraged a 2p gain to 116p by Medeva, the out-of-favour drugs group. The chemicals group Courtaulds was lowered 5p to 559p on the appearance of a US lawsuit, which the UK group said was 'without foundation'.

HSBC, interim figures next week, recovered 13.5p to 730p, helped by the Hong Kong market's rebound.

Wolseley, the building materials group, was unchanged at 654p as SG Warburg placed 16.8 million shares at 632p. The cash will be used for a US buy and further expansion.

An analysts' meeting lifted the mini-conglomerate Frederick Cooper 3p to 77p; WB Industries, suspended at 10p, returned at 8p. The shares of the property developer and spring maker were suspended in November. Phoenix Timber held at 18p. Its rescue rights issue has been increased to pounds 1.62m.

Greyfriars, an investment trust, rose 3p to 29p. English Trust, which intends to retain the share quote, has bid 27.75p a share.

The FT-SE 100 index closed unchanged and the FT-SE 250 index shaded 0.9 of a point to 3,494.7. Turnover was 670.9 million with 31,879 bargains. Government stocks drifted. The account ends next Friday with settlement on 13 September.

ACT, the computer group, was little changed at 175p as the merchant bank Singer & Friedlander placed, through Credit Lyonnais Laing, its 10.37 per cent shareholding at 161.5p. The shares were spread among institutions, with S&F collecting pounds 30.86m. ACT, the old Apricot group, recently paid pounds 93.5m for BIS, a banking software business owned by Nynex Corporation of the US.

The unquoted Redrow Group placed its near 11 per cent stake in Bellwinch, the housebuilder. Hoare Govett is thought to have done the business at 40p. Bellwinch rose 1p to 41p. Last month Redrow paid pounds 23m for the Costain housebuilding side. Bellwinch reports year's results next week. They will not be impressive, but there are hopes of a sharp improvement in the current year.

Roger Allard yesterday quit as managing director of Owners Abroad. His departure was signalled when Owners admitted it had suffered a trading downturn, which contrasted with the bullish indications in the Airtours bid battle. Howard Klein is expected to stand down as chairman next week. Mr Allard is thought to have sold 2.5 million shares at 83p. Owners rose 4p to 84p.