Market Report: Traders gorge themselves on appetising bid menu

A NEW outbreak of bid fever kept the market afloat yesterday. Fund managers awash with cash are desperate to spot the next takeover targets and dealers are constantly being urged to pile into bid-friendly sectors.

The long list of bid preys gained another name yesterday in Compass. The catering giant jumped 31p to 727.5p in good volume of nearly 4 million as buyers tucked into its shares. Traders were served an appetiser of rumours that trading in Compass's main divisions is booming, but the main course was talk of a strike from a rival.

Freshly-baked stories suggested that Compass may be on the bid menu of Granada, 3p better at 513p. The story had a certain logic; according to the whispers, the leisure and TV giant is working on a split of its hotels and catering division from its media activities. If and when the carve- up happens, Granada will need to boost its food side and, at less than pounds 5bn, Compass would be a tasty and affordable morsel.

Some stubborn dealers still believe that Compass could be sought by the business services group, Rentokil Initial. However, stronger rumours suggest that the pest control giant, 13.25p better at 220.5p at the start of an American roadshow, is working on a pounds 700m share buyback programme and, if anything, could be vulnerable to a takeover itself.

The bid stories were not confined to food and pesticides. British Telecom fell 11.5p to 1,090.5p on fears that it might team up with Rupert Murdoch's News Corp to bid for French conglomerate Vivendi. BT's rivals were also caught up in the consolidation wave; Orange squeezed 41p higher to 1,606p on growing hopes that Mannesmann's offer could be trumped by a bid by France Telecom and Vodafone AirTouch, 1p better at 318p. COLT Telecom (third-quarter numbers today) rose 45p to 1,865p on continued takeover talk.

All this bid excitement helped to push blue chips higher. The FTSE 100 ended 17.7 points better at 6,374.3 despite a wobbly opening for the Dow in New York, unsettled as it was by Microsoft's legal troubles.

The leading index was also boosted by BP Amoco, its biggest constituent. The oil giant flared 25p higher to 566p after good third-quarter results and a deal with the Alaskan government over its Arco acquisition. However, the rally petered out in the afternoon as US arbitrageurs started selling BP and buying Arco as a cheap way into the UK group.

Building stocks were also rocked by bids, real and imagined. Cement-maker Rugby rose a solid 14.5p to 132.5p after agreeing a 137.5p-per-share offer from rival RMC, down 40p to 870p. RMC brokers ABN Amro and Warburg bolstered the offer by buying 19.9 per cent of Rugby in the market.

Fellow building materials groups Blue Circle, up 4.25p to 316.25p, and Aggregate Industries, 0.75p firmer at 75.75p, are rumoured to be the next to go. Tarmac fell 5p to 569p despite whispers of share-buying by its bidder Anglo American, flat at 3,300p.

Banks are another hot sector. NatWest jumped 4p to 1,446p on growing hopes that Royal Bank of Scotland, 15p lower to 1,389p, will counterbid.

Utilities took a bit of a hammering after JP Morgan pulled the plug on the sector. Powergen, 24p down to 586p, United Utilities, 17.5p lower to 581.5p, and BG, 8.5p worse at 325.25p, were hit badly. Thames Water flushed 12.5p lower to 904.5p despite whispers that it had asked RWE of Germany to bid for it.

Corus Group, the old British Steel, shed 4.75p to 108.75p after an institution offloaded a line of stock through Morgan Stanley.

The midcap failed to follow the leading index and closed 6.6 points lower at 5,811.7, while the Small Cap fared better with a 7.8 rise to 2,705.8.

Troubled retailer Storehouse bagged a 4p rise to 80p on revived rumours of a bid from cash-rich shell Knutsford, down 7.5p to 202.5p, or entrepreneur Philip Green. Hopes of a property deal sent Selfridges 9.5p higher to 263.5p. However, other retailers were in the doldrums; Safeway lost 14.75p to 197.25p on profit-taking, while Arcadia slipped 2p to 155p after house broker CSFB reduced forecasts.

Financial group Gerrard rose 25.5p to 426.5p on rumours of upcoming good results, while rival Versailles climbed 10.5p to 213.5p on rehashed bid talk.

Picture-booth operator Photo-Me clicked 64p higher to 389p as investors rushed to buy stocks after a five-for-one split.

Bid talk helped media agency Cordiant to flash 7.5p higher to 211.5p , while whispers of a bad millennium season sent Thomson Travel 3.5p lower to a all-time low of 90p. The minnows were boosted by the craze for Web stocks.

Internet investor Cambury Investments soared 10.5p to a record 16.25p: punters are said to overdosing in the hope of a major deal. Rivals StartIT.com, 3.5p better to 13.75p, and evestment, 3.5p higher to 13p, were supported by similar rumours.

Vocalis, maker of a speech-activated software system, soared 14p to a best-ever 206p on whispers of new contracts, while software group Multimedia firmed 2.5p to 7.5p after admitting talks over a significant fund-raising exercise. Cash shell Blakes Clothing put on 1.5p to 4.75p on talk of a reverse takeover deal.

Pawnbroker Albermarle & Bond was flat at 51p despite talk of good trading, while restaurant tiddler Paramount digested a 7.5p rise to a yearly peak of 42p after unveiling a bid approach. The Money Channel beamed 37.5p higher to 133p after a deal with Granada Mediasales. Biotech group SkyePharma, on a US roadshow, shot 6.5p higher to 53.25p after Merrill Lynch said it is worth 95p.

Engineer Tex Holdings added 10p to 121.5p on rumours that upcoming results will be excellent. Software minnow Anite rose 3p to a 12-month high of 75p on broker upgrades and takeover talk, while whispers of a contract sent robot-maker Robotic Technology 33.5p higher to a record 375p.

SEAQ VOLUME: 1.35bn

SEAQ TRADES: 96,262

GILTS INDEX: 107.82 -0.40

f.guerrera@independent.co.uk

RECRUITMENT GROUP BNB Resources, flat at 138.5p, is back in the bid frame. Stories suggest that BNB has been contacted by a venture capitalist group with an offer of up to 200p a share to take the company private. Some traders believe that the board has so far rejected the approach. However, some optimistic punters hope that the venture capitalist - rumoured to be Apax Partners or Alchemy - could come back with a higher bid.

SOME HOT money is chasing software group Alphameric. Shares in the maker of a revolutionary kit for satellite broadcasting beamed 10p higher to 113p - a five-year high - on whispers that a large telecommunications company is having a look and that new contracts are on their way. France Telecom has been mooted in the past as a potential bidder. Insiders believe the technology could soon be licensed to a bookmaker or phone company.