Match-makers see GUS and Next as a tailor-made fit

MARKET REPORT

There has for long been a feeling that Great Universal Stores and Next, the revitalised retailer, are made for each other.

The announcement this week that Lord Wolfson of Sunningdale will replace his cousin, Lord Wolfson of Marylebone, as GUS chairman in September is seen as putting at least some flesh on the bones of the merger idea.

GUS shares outperformed other blue chips, gaining 33p to 665p, a year's high. They have climbed 51p since the change at the top became known on Thursday.

The stock market view is that GUS's management, although sound, could do with a little more zip. Once highly secretive, it has adopted a more outgoing approach in recent years. Yet it is still regarded as inward looking and uncommunicative compared with most other blue chips.

Lord Wolfson of Sunningdale is chairman of Next and will remain so when he takes over at GUS, once known in the market as "Gorgeous Gussies". A merger with Next is seen as a logical extension of his Lordship's dual role.

By linking with Next he would bring on board David Jones, the company's managing director.

With Lord Wolfson, Mr Jones rescued Next, turning it into one of the country's best-performing retailers. The shares were down to the equivalent of 13.5p at Christmas five years ago. Yesterday they slipped 5p from their 449p peak.

GUS is cash-rich and could comfortably swallow the much smaller Next.

The suspicion Mr Jones would revitalise GUS, injecting the Next philosophy, is behind the strength of GUS shares. The group's interim results were at best solid with the market looking for year's figures of pounds 596m against pounds 560.9m. NatWest Securities reduced its rating from add to hold.

The market ended the week with the FT-SE 100 index off 9.5 points at 3,630. Shares have fallen back each day this week with Footsie down 50 points. It is the longest bear run since September last year when the index fell for seven trading days.

For a time yesterday it looked as though blue chips would end on a positive note. But New York's failure to hold early strength proved too much.

Laporte's profit warning also hit sentiment. Shares of the chemical group crashed 173p to 610p, putting the dampener on other chemical counters.

But T&N, on the asbestos judgment, jumped 35p to 165p; Rolls-Royce reflected the recent run of aero engine orders, gaining 2.5p to 174.5p.

De La Rue, the security printer soon to be removed from Footsie, rose 33p to 685p and another reject, Arjo Wiggins Appleton, gained 3.5p to 162p. Inchcape continued to fall, down 4.5p to 206.5p although on one investment yardstick, the ratio of turnover to market capitalisation, the shares look undervalued.

National Grid, due to make its first official appearance on Monday, was a shade firmer at 209p in its when-issued form. Trading was brisk with Seaq putting turnover at 17.1 million. Charterhouse Tilney is looking for a gain of up to 15p in the first few days of trading.

Vickers, the engineering group embracing Rolls-Royce cars, held at its year's high of 280p. There is talk GKN is contemplating a bid.

Tate & Lyle improved 8p to 465p following a Merrill Lynch presentation. US support lifted Unilever 23p to 1,328p and BSkyB added 16.5p to 418.5p following plans for new TV channels. Reed International continued to fret about Internet competition, declining a further 21p to 987p.

Amstrad dropped 13p to 238.5p; the shares have fallen from 283p since chairman Alan Sugar said last week that trading was tough.

Insurances were weak on the lack of takeover action with Sun Alliance, off 13p at 374p, leading the retreat.

The bio-babes were mixed with British Biotech succumbing to further profit- taking, falling 82p to 1,528p. Biotrace lost 5p to 34p and Proteus 15p to 111p.

Devro International, the sausage skin maker, rose 12p to 251p as it said it would raise pounds 31m through a placing and open offer to help pay for Teepak International, its US counterpart. Shares will be placed at 230p.

Firecrest, only a few weeks ago the Internet wonder share, fell 20p to 145p but what was thought to be bear closing helped Tadpole Technology 13p higher to 79p.

Antonov, with a revolutionary gearbox, rose 10p to 136p on talk the long awaited deal with a car maker was at last about to be clinched.

TAKING STOCK

r Shares of Oliver, the struggling shoe retailer with 380 branches, lost their down-at-heel look, striding 22.5p to 63.5p. It is expected to make a pounds 9m profit on the sale of its former head office which is to be used for retailing following Leicester City Council's decision to withdraw its objection. Oliver, headed by company doctor Denis Cassidy, is expected to suffer a trading loss of about pounds 5m this year.

r Another offbeat AIM recruit; a company called Self Sealing Systems International, which has developed a method of sealing balloons, is raising pounds 1.06m by placing shares at 54p. Its "illustrative" projections suggest a loss of more than pounds 1m for the current 20 months with profits next year. Behind the issue are John East & Partners and broker IA Pritchard.