Finance and water turn up the heat in takeover fever

Market Report/Shares

Takeover excitement gripped the stock market again as financials and waters joined electricities in the firing line.

The decision of Banque Indosuez to sell its controlling interest in the Gartmore fund management group, and the signalled descent of Lyonnaise des Eaux on Northumbrian Water produced the new wave of excitement. After the market closed Southern Electricity said it was in bid talks.

Gartmore, where Schroders and US groups Merrill Lynch and GE Capital emerged as the front runners, jumped 39p to 262.5p, reviving some of the more exhausted bid rumours which dominated the sector earlier in the year.

Invesco put on 9p to 221p, Mercury Asset Management 31p to 899p and Perpetual 70p to 1,683p.

Although it is by no means regarded as one of the favourite contenders, Prudential Corporation, the insurance giant, was a name being whispered in connection with the new round of financial speculation. Some feel that now Peter Davis, ex-Reed International, is established as the Pru's chief executive it will not be long before the insurance group flexes its muscles.

There was takeover excitement once more at Legal & General, up 13p at 597p. A Continental assault has for long been the market's guess; but now, perhaps, Prudential, up 11p at 378p, has entered the frame.

Waters, which have lagged behind their electrical counterparts, gathered their enthusiasm from the expected Ofwat price terms which should leave the way clear for the French utility to launch its long awaited bid for Northumbrian. The water group's shares rose 40p to 995p in anticipation.

Hopes of a wave of water bids produced the strongest advance the sector has seen for months, lifting Anglian 19p to 569p, Severn Trent 22p to 627p and Wessex 14p to 345p.

Although, for once overshadowed by water shares, the regional electricity companies turned in another bright display with Southern Electricity leading the charges, up 61p to 897p ahead of the announcement it was in negotiations which are "likely to lead to a recommended offer". National Power is the favourite to strike as it attempts to emulate its co-generator, PowerGen.

NP fell 2p to 516p and PG, which has lifted its interest in its Midlands target to 20 per cent, gained 8p to 559p.

Manweb seems destined to fall to hostile bidder Scottish Power. The REC admitted its hoped-for overseas white knight, thought to be PacifiCorp, had pulled out. Manweb fell 16p to 998p and Scottish, which has built a 17.25-per-cent stake in its intended victim, rose 6p to 352p. Meanwhile North West Water, up 6p at 590p, continues to accumulate shares in Norweb, lifting its stake to 11.7 per cent.

The FT-SE 100 index was back above 3,500 points with a 29.2 gain to 3,508.2. The supporting 250 index jumped 34 to 3,948.8. Turnover, however, was not particularly strong with many fund managers holding back on the last day of the trading quarter.

Grand Metropolitan was again busily traded, with the shares up 2p at 445p. A US fund, it is said, is trying to complete a 40-million buying order. Reed, the publishing group, fell 16p to 955p with suggestions that profit downgradings were being prepared.

Spring Ram dipped 1p to 34p with some large lines going through at 30p, with speculation that former chairman Bill Rooney had cut his 10.2-per- cent stake. Telpec, maker of electro-communications equipment, held at 731p as chairman Frank Hackett-Jones netted pounds 14.4m selling shares at 720p. Unipalm was the day's big talking point with the shares crashing 123p to 428p after scoring a 54p gain. Many had expected an offer of more than 700p a share; in the event it is likely to be around 450p, with Microsoft as the rumoured bidder.

TLS, a vehicle rental group, attracted a 79.2-per-cent take up of its open offer, lifting the shares 1p to 68p. There are hopes profits will top pounds 4m this year against pounds 1.7m. Costain, the hard-pressed builder, held at 69p as Middle Eastern construction group, Mohamed Abdulmohsin Kharafi & Sons picked up almost 1.3 million shares, taking its holding to 15.8 per cent .

Trencherwood, a builder, tumbled 2p to 6p on a profit warning, and Benson, an engineer, almost halved to 3.75p as it reported half-year losses and said it was seeking a "suitable partner".

The surge to AIM continued with Crown Products, a toys company, among those arriving. By Monday AIM should embrace around 90 constituents.

TAKING STOCK

The rumoured First Choice rights issue was expected to appear yesterday. Its failure to do so increased speculation that the holidays group was having problems getting City support for the cash call. It needs the money for a clutch of takeovers, one thought to involve a Canadian operation. First Choice, formerly Owners Abroad, is 21 per cent owned by the German Westdeutsche Landesbank. Its shares held at 88p, against a 124p year's high.

ViewInn is due on AIM in November. The company is developing an interactive television screen operation offering a range of business services. Based on BT's Prestel software, the screens will be sited in UK and European hotel bedrooms. The group is hoping to raise pounds 1.5m and aims for an international network in 18 months.