Market Report: Utilities rescue struggling Footsie

SHARES IN Marston Thompson & Evershed, brewer of one of the nation's most renowned traditional beers, were in a rare old ferment as rumours of a takeover bid swirled around.

The price rose 26p to 198.5p in brisk trading, with stories circulating that Wolverhampton & Dudley Breweries could be planning a 300p-a-share strike.

A merger would make sense in the highly competitive brewing industry. Both Marston and Wolves have felt the impact of the brewing upheaval, which has relegated regional brewers to the poor relations of the drinks industry.

The shares of the two have seen better days. Marston was 360p in the summer; Wolves, unchanged at 419p, touched 556p in June and 705p last year. Clearly a deal to change market perception of the groups would be well received. It would create the country's biggest regional brewer with almost 2,000 pubs.

Marston, famed for its Pedigree bitter, is talking to Nomura, the Japanese bank, about securitising its tenanted pubs. It is unclear just how near the talks are to reaching agreement or whether Wolves, the bigger of the two, was stirred into action by the proposed deal.

Marston's attempt to join the branded pub bandwagon has caused it some discomfort. It overpaid for the Pitcher & Piano chain, splashing out nearly pounds 20m. Its plan to roll out the concept nationally has proved difficult to realise.

With brewing groups giving up beer production to concentrate on retailing, the beerage is in turmoil. Vaux, the Sunderland group, is abandoning brewing to run its Swallow hotels chain and upmarket pub and has put its two breweries and 350 bottom-of-the-barrel pubs on the market. Director Frank Nicholson is attempting a buyout, but is thought to be finding it difficult to get the necessary support.

Utilities rescued Footsie. At one time it was down 74.4 points, but the privatised groups strengthened as the day progressed and briefly, just before the close, the index achieved a chink of blue before ending 1.6 down at 5,432.3. Supporting shares ran out of steam, with the mid cap off 60.5 at 4,874.4 and the small cap 6.6 at 2,059.8.

Severn Trent was the best-performing Footsie constituent, up 60p at 1,090p. Thames Water, 40p at 1,166p, and United Utilities, 24p at 885p, were among others in form as Credit Lyonnais said the water sector was undervalued. British Energy, National Grid and National Power also made headway.

Woolwich, the mortgage bank, featured in a mixed banking sector. The shares rose 6.5p to 366.5p, putting another touch to the sort of graph (see illustration) which excites chart followers. The graph, some say, foreshadows corporate action.

The Scottish banks remained friendless. Royal Bank of Scotland fell 34p to 793p and Bank of Scotland 25p to 592p. The two have been subjected to analysts' caution.

BT gained 9p to 831p, with Merrill Lynch making positive noises. Speculation is growing that the group could hand to shareholders some proceeds from the sale of its 20 per cent interest in MCI.

Allied Domecq was little changed at 516.5p. After the market closed Seagram, the Canadian group, killed slender hopes of the two achieving a spirits tie-up.

Since the creation of Diageo there has been talk of Allied linking with Seagram to counter the threat of the new spirits colossus. But Seagram issued a go-it-alone statement, talking about expanding its wine and spirit operations over the next five years.

Blacks Leisure, the sportswear retailer, remained in the takeover spotlight, gaining a further 17.5p to 271.5p. Celtic, the Glasgow football club, rose 30p to 292.5p as a consortium including Kenny Dalglish and singer Jim Kerr threatened a bid.

Booker, the cash-and-carry chain, collapsed 54.75p to 64.25p after a profits. Two potential bidders, Somerfield and Budgens, have already walked away from the struggling group. Iceland rose 10.5p to 226p following its home shopping move; it expects to offer a food shopping service through digital television next summer.

Retailers were ruffled by a gloomy British Retail Consortium survey. Storehouse, also under pressure from CSFB, fell 7.5p to 168p and Next 23.5p to 490p.

BICC, the cables and construction group, was little changed at 55.5p following Monday's analysts meeting. Henderson Crosthwaite put a 120p sum-of-the-parts valuation on the shares and said buy.

Porvair, the materials group, slumped 92.5p to 146.5p after warning of losses. RJB Mining fell 4.5p to 55.5p, a new low. The market is fretting about the possibility of the group encountering a miners' strike - the first since the 1980s. National Union of Mineworkers officials meet tomorrow to discuss action after failing to reach a pay and conditions deal with RJB.

SEAQ VOLUME: 855.6 million

SEAQ TRADES: 58,191

GILT INDEX: 111.45 +0.60

THE ELECTRONIC share dealing revolution continues. Posit, a computerised trading system, is due to be launched next Wednesday. The execution-only stockbroker matches trades twice a day and it should clinch its first deals at its morning fixing.

Posit is a joint venture between Societe Generale, the French bank, and Investment Technology of the US. Posit has already achieved a significant presence in the US.

LIMELIGHT, the bathroom and kitchen group which has had a disastrous stock market life, is thought to be meeting institutions in the next few days. The shares are 28.5p: they were 200p two years ago.

The group is vulnerable. Stephen Boler, a major shareholder, died in Africa, and his stake may be available. Mr Boler was also a big shareholder at Ofex-traded football club Manchester City, up 5p at 80p.