Airtours close to deal with Carnival cruise giant

MARKET REPORT

Final agreement is understood to have been reached for Carnival Corporation, the world's largest cruise ship operator, to take a near 30 per cent stake in Airtours, the second largest holiday company in the UK.

Airtours first admitted it was in talks the week before last, following a sharp rise in its share price. A City source said yesterday that the deal documents were close to being signed. The deal will mostly involve the issue of new shares and be accompanied by a partial offer to existing shareholders. Airtours, valued at almost pounds 500m, is a very tightly held stock. David Crossland, chairman and founder, owns 30 million of the 115 million in issue, and there are several large institutional holders.

Airtours may well accompany any announcement on Carnival with a separate deal to buy Spies of Denmark, as part of its concerted push to expand in Europe by establishing a firm base in Scandinavia.

Speculation that the deal might be imminent did not start circulating until the market had closed for business yesterday. By the close of dealings, shares in Airtours were trading 2p down at 424p largely reflecting disappointing results from Eurocamp. The specialist camping operator caused disappointment by reporting a 20 per cent decline in bookings for this summer.

Investors were wrong-footed by the report despite bad news on holiday bookings by every other tour operator in recent weeks. Eurocamp's shares plunged 21p to 230p, and almost one million were dealt. First Choice, the UK's third largest tour operator, dropped 3p to 71p.

The market was largely bereft of gossip yesterday and share prices generally spent much of the session marking time. The FT-SE 100 share index bounced around between plus and minus 7 points, and finished virtually bang in the middle at 3,734.6 - a fall of 0.1 on the day.

Investors paid very little attention to the record-breaking antics on the other side of the Atlantic. Trading on Wall Street yesterday opened on a firm footing following Friday night's 55 point surge in the Dow Jones index to yet another peak of 5,271.75.

A lack of real takeover action and fading hopes of fresh cuts in interest rates appear to be keeping the lid on the London market. Gilt edged stocks recorded losses extending to a quarter of a point. Volume trading yesterday struggled to reach 688 million, given that there was some very chunky business conducted in several of the leaders. The most actively traded included British Gas, 21 million, Lloyds TSB, 32 million, and 12 million each in British Steel and Forte, which disappears from the Footsie tomorrow.

British Gas dropped 4p to 236p. Complaints against the company have doubled, and it is becoming enbroiled in a fierce row over its right to cut off power stations amid one of the coldest winters in decades.

A chilly wind also blew across the financials pitch. Worries about an all-out war among mortgage lenders took Abbey National down 18p to 614p. The fall wiped pounds 237m off the company's value.

The main fear is that Nationwide - the country's second largest lender - is on the verge of slashing mortgage rates and simultaneously raising interest rates for savers. This will put the squeeze on building societies that have turned banks - such as Abbey National - because such moves will eat into profits and limit their scope to raise dividend payments to shareholders.

The threat of a mortgage war prompted analysts James Capel and SBC Warburg to switch their investment recommendations for Abbey yesterday from buy to hold.

Away from the gloom, several second liners registered reasonable gains on sustained and fresh bid speculation. Lloyds Chemists sprinted 24p to 450p as rumours intensified of a counter-offer by Gehe of Germany to Unichem's agreed bid made a fortnight ago. More than 3.5 million shares in Lloyds changed hands. Unichem fell 6p to 249p.

Renewed bid speculation lifted Ladbroke 5p to 174p. The company - seen in some quarters as a target for Bass - is negotiating to buy the Barracuda casino in London from Stakis, steady at 87p.

Reed International firmed 7p to pounds 10.17p on rumours of an imminent pounds 60m disposal of its 50 per cent share in Book Club Associates to its joint venture partner, Bertlesmann. There is also talk that Virgin Publishing is looking to buy Reed Consumer Books for up to pounds 100m.

Shares in Boots climbed 12p to 619p on gossip that it was to sell its Childrens World stores to Storehouse, a penny softer at 292p.

TAKING STOCK

r Oei Hong Leong, the Chinese tycoon, is believed to have tightened his grip on Bolton Group and is looking to use the tiny property investment company as a vehicle to buy telecom and cable firms. More than 17 million Bolton shares, up 2p to 25p, were traded. It is understood Giant Point Developments, his holding company, has increased its stake in Bolton from 27 to 28 per cent by buying shares from other directors.

r Trading volume in VideoLogic was brisk, with more than 1.6 million shares dealt by the close of business. There was gossip that the company was close to signing a couple of big supply deals for its multimedia computer chips. One of the deals is said to be with IBM. Shares in VideoLogic firmed 0.5p to a year's high of 68p.