Market Report: Investors pile into Caradon on talk of major disposals

THE BUILDING materials group Caradon was as solid as cement in the face of a crumbling market amid talk of imminent disposals. The midcapper firmed 3.5p to 170.5p in fairly chunky volume of 5.1 million shares as a number of buyers donned their hard hats and piled into the stock.

The whispers coming from the City's buildings - many of which are equipped with Caradon's kit - suggest that the group is lining up a major disposal.

Under chief executive Jurgen Hintz, the one-time struggler has already sold off some pounds 200m-worth of non-core businesses and market watchers believe there is more to come. At present, the company operates in four areas - plumbing, electrical, security printing and aluminium extrusions - but rumours are that a couple of these divisions could go.

Followers of the stock said that the successful security printing unit is likely to stay but the remaining three could all be sold at the right price. The proceeds of any sale could then be used to tidy up the balance sheet and to finance the expansion of the other divisions.

Mr Hinz has been given an added incentive to act quickly to boost the share price by the arrival on its share register of the aggressive investor UK Active Value. The fund manager, run by the feared South African duo of Brian Myerson and Julian Treger, has recently bought a 3.5 per cent stake in Caradon and is certain to try to engineer a takeover if the share price does not improve.

The overall market had a miserable day, as profit-taking, weaknesses in heavyweight sectors and fears of a rate hike depressed sentiment.

The FTSE 100 finished 48.2 lower at 6,694, after having been as much as 85 points down. Macro and micro issues were behind the leading index's slide. On the macro side, there is a creeping fear that Thursday's Bank of England meeting could bring a pre-Christmas rate rise.

And on the micro side, a slump in the pharmaceuticals sector took more than 40 points off the index. The drug stocks rout was started by the US fund manager Cowen, which issued a sweeping sector downgrade.

The bearish note pushed SmithKline Beecham 61.5p lower to 822p and Glaxo Wellcome 48p lower to 1,828p. Rival AstraZeneca, down a hefty 208p to 2,522p, compounded the misery with a poorly-received research & development update.

Some of the rampant hi-tech stocks took a bit of a breather as Nasdaq had a lacklustre start. Sema dropped 96.5p to 1,201p, while Misys fell 58.5p to 816p. Rumours of corporate action propped up some of the rising blue chips such as Allied Domecq, up 15.5p to 325.5p, on rehashed whispers of a strike from a rival drinks group.

Cable group Telewest soared in early trading and was forced to admit it was in merger talks with TV producer Flextech. However, after the announcement both stocks pared their gains, with Telewest ending just 12p higher to 351.25p and Flextech rising 182.5p to 1,532.5p.

Telecoms were once again flavour of the day. Vodafone Airtouch jumped 13p to 318.75p on whispers that German fund managers are warming to its bid for Mannesmann.

BT, 47p higher to 1,459.5p, and Colt, up 52p at 2,505p, were excited by news that US giant AT&T will split off its wireless business. Cable & Wireless surged 20.5p to 898p on reports that its Australian subsidiary is to link up with Richard Branson's Virgin.

Takeover talk pushed mining group Billiton 12.25p higher to 323.75p, while whispers of contract wins sent British Aerospace 5.75p higher to 409p in big volume. Caterer Compass Group dished out a 23.5p rise to 753.5p on optimism on Thursday's interims. Bass frothed 18p higher to 699p amid rumours of a bullish trading statement with tomorrow's finals. But publisher Reed dropped 6p to 386.75p ahead of Thursday's trading statement, and retailer Kingfisher fell 37p to 555p on worries about tomorrow's update.

The midcap was also in depressed mood, falling 16.6 to 6,309.4 despite a welter of bids, real and imagined. Investment vehicle Wassall climbed 52p to a yearly peak of 332.5p after unveiling a bid approach, possibly from US conglomerate Cooper Industries. Personal finance portal eXchange Holdings surged 44p to a best-ever 316.5p on talk of a large deal, while bombed-out engineer Senior bashed 7.5p higher to 77.5p on vague bid speculation.

Retailers were mixed. Discount chain Matalan jumped 97.5p to 1,435p after a positive trading update, while New Look rose 7.5p to 128p on renewed bid talk. Storehouse was flat at 53p in big volume amid the usual break- up rumours, while Somerfield dropped 1p to 82p despite whispers of a lively auction for its stores and Arcadia fell 8p to an 86p low on fears of worsening trading.

Car hire group Avis Europe crashed 24p to 205p - a 12-month low - amid whispers of tough trading, while bus group Go-Ahead reversed 52.5p to a yearly nadir of 502.5p on its imminent ejection from the FTSE 250.

The Small Cap bucked the dull trend with a 12.4 rise to a best-ever 2,944 as retail investors continued to pile into several stocks. Hardware tiddler Tadpole Technology buzzed 12.25p higher to 61p on rumours that a deal with a large European group is close.

Hi-tech security products specialist Screen soared 8.75p to 14p after placing 15 million shares at 4.25p. New deals are expected soon. Lighter- maker Ronson, up 0.825p to 2,150p was on fire amid wild rumours that the legendary Victor Kiam was ready to sell its stake to accommodate a reverse takeover by an Internet company.

Internet investor eVestement rose 9.25p to 34.75p on whispers of a major tie-up for its share dealing service, while PR firm Text 100 debuted with a huge 140p rise to 310p. Cash shell Lionheart, where Luke "Pizza Express" Johnson is a shareholder, dropped 9p to 22p amid profit-taking.

But houseware distributor Glenchewton soared 11p to a yearly high of 67.5p after Mr Johnson's Intrinsic Value fund lifted its stake from 3 per cent to 5.87 per cent, triggering whispers of a reverse takeover. Ofex-tiddler Motion Media soared 50p to 580p amid whispers of a flotation on the main list.

SEAQ VOLUME: 1.94BN

SEAQ TRADES: 126,007

GILTS INDEX: 105.60 +0.22

f.guerrera@independent.co.uk

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