Market Report: Kingston soars as bid talk sets bells ringing

THE TELECOM bonanza returned with a vengeance yesterday and Kingston Communications made the most of it.

The Hull-based company almost eclipsed a soaring FTSE 100 with a 12 per cent rise as rumours of a bid, good results and new deals set the dealers' phones ringing. At the end of a lively session, Kingston was 68.5p higher at 636.5p - its highest level since July's 225p flotation.

Traders' lines were jammed with three different rumours. The more intriguing one is that Kingston is preparing to expand its fast-growing Torch division, which specialises in business telecommunications. Torch is already in Yorkshire, the South-west and the Midlands, and according to the rumours, a new area, possibly in the South, will soon be added.

The launch of a new service would be greeted warmly by the market as it would underline Kingston's commitment to cover the country with Torch lines. An announcement is expected soon and some optimistic souls said that it could even come with today's interims. A deal with BSkyB, up 17.5p to 666.5p, to provide Internet and digital television over the phone is also rumoured.

The figures themselves should not disappoint, with analysts expecting strong growth in sales.

The third and final rumour was, inevitably, that a predator is having a look at Kingston. The company has great potential and would be a good buy for a foreign or domestic competitor. These rumours have been heard before and dealers believe that there is no smoke without fire.

Rival Energis, up 140p to a best-ever 2,452p after good interims, could have a pop unless it gets taken over itself. The sector giant BT joined the party with a 31p jump to 1267p - within a whisker of it all-time high - on reports that it could float Concert, its international joint venture with AT&T.

Vodafone AirTouch bucked the trend, falling 2.25p to 273p on continued scepticism over its hostile bid for German conglomerate Mannesmann.

The Teutonic giant's acquisition of Orange was completed yesterday and the UK mobile phone operator disappeared from the FTSE 100. Index trackers immediately dumped Orange, 41p at 1,722p, in favour of its replacement, builders' merchants Wolseley, up 2.5p to 513.25p.

However, the swap between Orange, capitalised at pounds 21bn, and Wolseley, with a market value of around pounds 3bn, left fund managers with a lot of spare change which found its way to other stocks.

The cash injection, and a couple of large programme trades, propelled the FTSE 100 to a 92.2-point gain to 6,534.2 despite a weak start on Wall Street. The second liners underperformed the leaders but managed to finish close to their all-time highs. The midcap rose 21 to 6,122.2, while the Small Cap gained 5.3 to 2,855.

British Aerospace appeared to benefit from the cash squeezed out of Orange. The defence group shot 43.25p higher to 408.75p after the US regulator approved its acquisition of hi-tech group Marconi from GEC, 18p higher to 770.5p ahead of tomorrow's interims. The market is now betting on a US listing and even a US deal for BAe.

Engineer Invensys rebounded 18.75p higher to 323.5p on talk that its much-awaited shareholders' cashback could be announced with today's interims.

Financials were well-bid. NatWest jumped 20p to 1,357p on whispers that Royal Bank of Scotland, 31p better at 1,312p, will shortly trump the offer by Bank of Scotland, 16.5p up to 749.5p. Bid rumours returned to push insurers Legal & General 7.75p higher to 178p and Norwich Union 17.75p better at 458.75p. Publisher United News & Media firmed 37.5p to 703.5p amid talk of a listing of its US Internet business, while gas group Centrica flared 5.75p higher to 164p amid growing rumours that an overseas bid or a telecom tie-up with Energis is near.

The year-end is looming and fund managers are reshuffling their portfolios. Yesterday, computer group Sema fell 38p to 1004.5p after MAM said it had sold its 10 per cent stake. Old bid chestnut Pilkington climbed 6p to 92p after aggressive fund Active Value increased its holding to 4 per cent. A bid is now even more likely. Manchester United was flat at 200p after BSkyB sold more than 1 per cent of its 11 per cent stake at a cut-price 183p.

Game-maker Eidos, 470p better to a 4,970p, starred in the midcap amid whispers that today's results will bring news on the new Lara Croft adventure.

Nestor Healthcare nursed a 51.5p rise to a best-ever 681.5p on vague bid talk and a shortage of stock. Electronic group Racal buzzed 23p higher to 451p in big volume after a winning a pounds 1.2bn contract to replace London Underground's communication systems. Bid rumours were also there. Financial group Perpetual shed 230p to 3,070p after bad results, but rival Versailles rose 14p to 250.5p on takeover talk. Caledonia Investments rose 24p to 720p thanks to its stakes in fund manager Rathbone, 2.5p up a record 880p, a rumoured bid target, and bank Close Brothers, up 11p at 958.5p, one of the industry's consolidators.

Newcoming tiddlers did well. Ofex-listed accident recovery group Ellen rose 12.5p to 57.5p while pet products distributor Zoa debuted on AIM with a 4.75p rise to 24.75p.

Today is the turn of cash shell Goodwood. The company, which wants to buy small car leasing groups, starts on AIM at 10p.

Weather tiddler Weather Action soared rose nearly fourfold to 90p after saying that an Internet company will reverse into it. Explorer Tuskar Resources rose 0.3p to 2p on whispers of a large find in Nigeria, while e-commerce group Infobank lost 16p to 764p despite late rumours of a bid.

SEAQ VOLUME: 1.73bn

SEAQ TRADES: 109,369

GILTS INDEX: 106.83 + 0.13

f.guerrera@independent.co.uk

THE IRISH oil explorer Bula Resources should be close to a major boardroom shake-up. Rumour has it that the Korean conglomerate Dong-Ah is set to appoint one of its senior directors to the board.

Dong-Ah apparently owns 7.5 per cent of Bula and is keen to transform the company into one of the biggest players in the oil industry.

The Malaysian oil group Petronas could also come on board soon to help Bula develop its Lybian fields.

PENSIONERS in the Cooperation Retirement Benefit Fund should feel a little richer this morning. Their fund managers are thought to have sold some 18 per cent of their 38 per cent holding in Sterling publishing at a cut-price 59.5p for a cool pounds 8.26m. Some of the dumped stake was picked up by Sterling's directors, including chairman Christopher Haines and chief executive Simone Kesseler. The rest of the stake went to a mystery buyer, which could either be another fund manager or a predator.