Market Report: Cash call fears undermine Cadbury gain

ON a day dominated by the Imperial Chemical Industries shake-up the stock market, seeking a new diversion, alighted upon the possibility of a big swallow being announced by Cadbury Schweppes, the confectionery and soft drink group.

Acquisitive Cadbury is thought to be anxious to capture Terry's, the sweets group owned by United Biscuits. A price of up to pounds 250m is, it is said, being discussed.

UB, which acquired the Phileas Fogg snack food operation for pounds 24m on Wednesday, let it be known last week it was looking for a buyer for Terry's.

Favourite to complete a deal is Philip Morris, the aggressive and cash-rich US brewing, food and tobacco group. But the story yesterday was that Cadbury had made a late, determined bid to win the Terry's operation.

However, fears were expressed that Cadbury would accompany the acquisition, which could face Office of Fair Trading problems, with a cash-raising exercise. Its shares, after an early gain, ended 2p lower at 456p. UB rose 8p to 367p.

ICI advanced 70.5p to 1,152.5p with US investors apparently warming to the signalled cash call and Zeneca demerger. The shares attracted heavy futures interest, with 2,307 call contracts taken up. But the BTR conglomerate, widely expected to bid for Lucas Industries, was the most popular option stock, with 3,736 calls.

The investment group SG Warburg, reflecting the fee income from the ICI package, rose 8p to 628p.

The FT-SE 100 index, after early hesitancy, rose 11.7 points to 2,828.7. ICI was responsble for more than 3 points of the gain.

The ICI announcement tended to settle market nerves, which had become increasingly frayed by talk of massive cash calls. With the ICI/Zeneca demand for pounds 1.3bn put off until June and another rights candidate, Royal Insurance, producing figures without tapping shareholders, there was a large element of sheer relief to bolster sentiment.

But trading was often subdued, with many pondering the possibility that ICI's delay could encourage another cash-hungry group to hit the market. British Airways, Barclays and Glaxo Holdings remained the favourites.

BA will, it is thought, put off any bid for cash until it has given a decent burial to the Virgin 'dirty tricks' debacle. Barclays is due to produce its results next week. There are fears it will accompany them with a pounds 1bn call.

But such an exercise would be fraught with difficulties. After all, Barclays raised about pounds 900m in 1988 and even a group with its undoubted clout could feel it was being too demanding.

The banking group's results are unlikely to be inspiring. Some expect a loss of pounds 75m. There is also a debate whether the dividend will be held.

Barclays also had to contend with wild rumours it had been called to the Bank of England to discuss its loan book. The story was quickly denied.

Glaxo is emerging as the rights favourite. It is thought to be contemplating a big takeover to increase its presence in the over-the-counter drugs market. Warner Lambert, the US group, is thought to be its target.

BA shares held at 285p; Barclays lost 4p to 420p and Glaxo fell 7p to 645p.

J Sainsbury outperformed a weak supermarket sector as Hoare Govett suggested the shares were a buy. The price rose 9p to 513p. Tesco, in busy trading, fell 4p to 229p.

Granada Group lost 3p to 389p on the Labour Party accusation it had breached its television franchise agreement. Airtours rose 4p to 306p, as the market awaited a higher bid for Owners Abroad, up 2p at 131p.

Micro Focus, the computer group with a big US following, had a roller-coaster session after producing its results. The shares were at one time up 88p; then US analysts took a more cautious view and the price tumbled to 2,515p, down 120p.

Aberdeen Petroleum advanced 1.75p to 15.75p on its figures and talk of a 28p-a-share offer from Pittencrieff, sitting on 19.1 per cent of the capital. Colorgen, the US group making computerised paint matching systems, tumbled 10p to 27p following interim profits below expectations.

Hartstone, the hosiery and leather group created by Stephen Baker, had another poor session as bear raiders continued to maul the shares. They fell 27p to 223p in active trading, making a two-day retreat of 43p. Stories abound about management changes and profit downgradings.

Shares ended an uneven session with the FT-SE 100 index achieving an 11.7-point gain to 2,828.7. The FT-SE 250 index was lowered 0.4 to 3,029.5. Turnover reached 620.6 million shares, with 28,278 bargains logged. Government stocks moved higher as buyers took advantage of early weakness.

Ossory Estates edged ahead 1p to 9p as a little more progress was achieved in the protracted restructuring. Alan Fosler, responsible for many of Hong Kong's most successful commercial developments, has become a director and there are hints of Hong Kong investor interest in Ossory. In addition a joint venture sale has added pounds 600,000 to working capital.

Avesco, a maker of television equipment, jumped 6p to 50.5p. SG Warburg has become financial adviser and stockbroker and is to explore the financing of the cash-hungry Videologic offshoot, which is developing a video, audio and computer system. IBM is already involved in the Videologic operation. Avesco has climbed from 14p in three months.

Cap Gemini Sogeti, the French computer group, is due to mop up the outstanding 30.2 per cent of Hoskyns, the UK computer group, in the next month. The offer should be 469p a share. Although Cap Gemini reaffirmed its bid intention in August it is now loss-making and may not welcome the pounds 115m outlay to take full control. Hoskyns shares held at 454p.

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