Market Report: Bid rumours bring Shell back to life

SHELL YESTERDAY was resurrected from its recent slump as a rush of bid rumours, like waves round an oil platform, engulfed the fallen giant. Bruised and battered by the collapse in crude and a set of catastrophic results, the Anglo-Dutch behemoth had been a familiar presence on dealers' selling lists for some time. But there were no hard feelings yesterday as the market seized on the news of a $238bn mega merger between Exxon and Mobil to prop up Shell's price. With BP already engaged to Amoco, Shell stood out as one of the few attractive singles in the oil world. The fact that there are very few companies suitable for a marriage with Shell did little to dent the buying spree and the shares ended up 4 per cent at 367.5p. BP chipped in with a slick performance and finished 23.5p higher at 956.5p.

The two oil groups account for more than 8 per cent of FTSE and the main index drew on their strength to put together a nice little rally. With Wall Street closed for Thanksgiving, the blue chips were also helped by domestic takeover activity and rising hopes of a rate cut after a bearish CBI survey. The result was a 72.6 point gain to 5,827.9, well above the 5,800 barrier. The undercard was more subdued with the midcap rising 14.5 to 4,940 and the small cap firming a meagre 5.4 points to 2,067.

M&S, down 24.5p to 421p, was the day's main casualty, as the market reacted badly to the retailer's "afternoon of the long knives". One broker said that the new chief executive, Peter Salsbury, was an "unknown quantity" in the market and his appointment would not shift the company's strategy. Marks & Sparks was denied the Footsie's wooden spoon by a bizarre trade in Stagecoach. One minute before the market close, 8 orders for exactly 726 shares at 225p went through. The roguish deal pushed the price, which had been hovering around 233p until then, down more than 7 per cent on the day.

Sainsbury offloaded 13p to 515p on jitters about its pounds 294m buy of US supermarket Star Markets, while Orange lost 24p to 608p after HSBC said "reduce".

3i, the venture capitalist, topped the blue-chip board with a 57p rise to 590p. A raft of brokers, led by CSFB, upgraded their stance after a good set of results. British Airways, up 18.25p to 425.25p, was also a high-flyer after buying the regional carrier CityFlyer for pounds 75m.

Brewers were another sector in demand. The market's thirst for beer stocks was triggered by the arrival of the long-awaited pounds 262m bid by Wolverhampton & Dudley for Marston Thompson & Evershed. The offer of 283p per share prompted a 41p rise in Marston share price to 287.5p, a hint that the market thinks Wolverhampton, down 5p to 425p, will have to increase its offer to win the day.

The ale battle focused traders' minds on the oversold booze index. Bass, the casualty of a recent profit warning, was the main beneficiary. The shares rose a smooth 60p to 850p, the second biggest riser among the leaders, as the market awaits next week's results. Whitbread kept its head and moved up 35p to 825p and Scottish & Newcastle was also up 18p to 743p. Greenalls, 15p higher at 356.5p, and Greene King up 14.5p to 535p, kept the regional brewers' flying high.

Dealers have been speculating about a bid for Marley, the building materials group, for a long time and yesterday it finally arrived. The surprise was the name of the pounds 283m suitor. John Mansfield, a small timber merchant, led by Stuart Wallis. Marley rejected the reverse takeover approach, but Mr Wallis's interest was enough to push the shares up 15.2 per cent to 98.5p. Mansfield lost 0.25p to 6.25p.

Plasterboard producer BPB lost 16 per cent to 217p after news of a EU anti-competition probe and dull interims.

Fellow building stock Birse engineered a 20.5 per cent climb to 11.75p, as a stock overhang for Gartmore cleared and rumours of a big contract win circulated.

BCH, the last independent car leasing company, motored 49p ahead to 218.5p, after receiving a bid approach. The mystery stalker is believed to be a financial group keen to get its hands on BCH's car pool.

Abbott Mead Vickers, the advertising agency which gave us the Yellow Pages ad, soared 48.5p to 408.5p. after being approached by the US ad major Omnicom. The bid should be pitched at between 425p and 450p. Chime Communications, up 6.25p to 50.25p, Saatchi, 9p higher at 134p and Character Group, up 14p at 330.5p, all felt sympathetic. The corporate frenzy was rounded up by David Smith. The paper and packaging group delivered a 12p advance to 121.5p after saying it wants to sell its office products business.

Devro, the food producer, left a bad taste in investors' mouths with a sour profit warning. The stock plummeted a hefty 18.5 per cent to an all-time low of 191.5p.

SEAQ VOLUME: 863.7m

SEAQ TRADES: 61,614

GILT INDEX: 113.55 +0.97

COUNTRYWIDE ASSURED, the former Hambro Countrywide, rose 2.5p to 114.5p in unusually heavy trading. The real estate agency and life assurance group saw some 46m shares traded. The culprit was a large shareholder's decision to sell a 5.7 per cent stake. The seller, tipped to be Guardian Royal Exchange, put some 22m shares on the market at lunchtime. The line was snapped up by two other large insitutions, dealers said.

DRAGON OIL rose 2p to 20.5p after a company headed by the deputy ruler of Dubai, Hamdan Al Maktoum, bought a 46 per cent stake for pounds 24m. The holding had been on sale since May when the Indonesian businessman Arifin Panigoro said he wanted to exit the company. Mr Maktoum will nominate four of the nine directors of Dragon. Graeme Thomson, chief executive and Grant Bowler, finance director, are set to remain at the helm.