Market Report: Unilever provides hint of drama on a lacklustre day

UNILEVER, the Anglo-Dutch giant, dominated a lacklustre stock market, bemused by interest rate worries but growing increasingly convinced that dramatic takeover action is being planned.

In thin trading, with the rail strike again depleting the dealing ranks, shares opened strongly but with little follow-through, enthusiasm soon evaporated and by the close the FT-SE 100 index was little changed.

A US interest rate move upwards could occur today but there are suggestions Germany may lower its rates on Thursday.

Unilever continued to bask in its surprise figures and the shares rose a further 10p to 1,107p, making a 65p jump since Friday's profit statement.

At least nine securities houses felt obliged to proffer advice; five regard the shares a buy, two a sell and the others a hold.

The deluge of comment added strength, probably indirectly, to vague rumours that the detergent and food group was in the market for a big takeover.

It has already been linked with the household goods business that the US group Eastman Kodak wants to sell. Now a much bigger target is rumoured; none other than Heinz, the international food group.

US markets have also been gripped by the suspicion that a huge corporate excursion looms. And Heinz is one of the names in the frame.

Its shares have been approaching their year's high. If Unilever should strike it would catch Heinz on the hop, still awaiting the benefits to flow from its big restructuring.

Unilever, it is suggested, is prepared to give up any ambitions it has towards the Eastman Kodak operation. Reckitt & Colman, up 4p at 635p, has emerged as the clear front-runner.

After drifting lower on fears that a deal would provoke a hefty rights issue, Reckitt shares have perked up in the past two trading sessions, partly on the back of Unilever's performance.

They have also been helped by an apparent scaling down of the price Eastman Kodak would be prepared to accept.

The new figure is pounds 650m, considerably less than the one bandied around last week.

There is also talk of action in the drugs industry, with Glaxo still thought to be working on a big transatlantic strike. Wellcome remains the subject of speculation. It is said the Wellcome Trust is contemplating selling its 39.7 per cent stake, thereby leaving the door open to a predator. Glaxo rose 7p to 630p and Wellcome 13p to 692p.

Guinness was another to attract attention. There is intriguing talk that the US investor Warren Buffett is dribbling shares on the market.

He has a little under 3 per cent and would be justified in concluding that his venture into spirits and stout has not been as rewarding as, say, his Coca-Cola plunge. But another theory is that he is merely testing the water ahead of making a big splash, possibly the purchase of the 4 per cent LVMH wants to sell.

In busy trading Guinness shares edged forward 3p to 458p. Weekend reports that the Government was reviewing the level of excise duty because of the growing popularity of the cross- Channel booze cruisers helped the more traditional brewers, with Bass up 6p at 574p and Whitbread 8.5p to 560.5p.

Suggestions of an Office of Fair Trading investigation into BSkyB lowered Pearson 6p to 623p and Granada 8p to 513p. SG Warburg placed 5 million Granada at 510p.

Calor Group, the gas distributor, had an eventful session following comment that margins were being eroded by a price war. The shares fell to 275p, closing down 9p at 281p after the company claimed cost cutting and operating efficiencies were matching the margin crunch.

The day's newcomers achieved gains. Chamberlain Phipps reached 170p from a 165p sale price; Copyright Promotions ended 2p higher at 122p and Pillar Properties closed at 157p from a 150p launch.

Electricities failed to hold early gains on talk of bids in the sector and the rewards to be reaped from a flotation of the National Grid, occasionally traded on the 4.2 market.

Storm, the media merchandiser, closed off its low after hitting back at weekend criticism. At one time down to 11.5p, the shares closed at 12.5p, off 5.5p.

Bullers, the giftware to meat processing group in discussion to buy two quoted companies, rose 0.5p to 18p as, it is thought, Jim Slater picked up another 120,000 shares in the 16p-17p range.

Blue chips hardly stirred, with the FT-SE 100 index off just 0.1 points at 3,142.2. The supporting FT-SE 250 index fell 9.6 to 3,719.2. Turnover was a lowly 463.1 million shares, with 28,885 bargains recorded.

Developments are expected at Owners Abroad, the holiday group which just escaped the clutches of its big rival, Airtours. The group's 12 brands are likely to be cut and its name could be changed to include the title of one of its bigger brands. The new management team is on track and the group's market share has recovered strongly. The shares rose 5p to 109p.

Faxcast Broadcast Corporation, traded on the backwater 4.2 share market, has attracted takeover attention. The company, formed to establish a global wireless communications network for the delivery of faxes, said it was in talks that could lead to a bid. Its shares have been moving ahead, prompting the statement. At 57p Faxcast is valued at pounds 68.3m.

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