National Power bid talk gives FTSE 100 a buzz

Market Report

AN AILING market was given an electric shock yesterday as bid rumours started buzzing around generator National Power.

The utility put together an electrifying performance, soaring nearly 8 per cent in higher-than-usual volume of more than 13 million shares.

National Power finished 34.25p higher at 492p - at the top of the FTSE 100's risers list as buyers piled in ahead of a mooted takeover or break- up offer at around 600p.

Traders were excited by whispers that the the abysmal share price performance by the generator could trigger a strike from a US bidder. Three names topped the market's wish list: AES, the American company that is buying NP's Drax mega-power station for pounds 1.85bn, and its two rivals Reliant and Duke Energy. Germany's RWE was also mentioned as an outside bet.

The company denied any approach but stubborn dealers insisted that a bid could come as early as today. Cooler heads said that an overseas bidder might not want to buy the whole of NP and could purchase its foreign operations. The UK company is widely believed to be plotting a separation of its UK and overseas divisions, which include operations in the US, Spain and Pakistan. The split would give potential bidders an ideal opportunity to pounce.

Alternative rumours suggested that NP might be close to announcing a successor to chief executive Keith Henry, who left in April after the collapse of merger talks with United Utilities, 4p higher to 701p on its own bid speculation.

The NP furore helped rival PowerGen to a 37.5p rise to 667.5p amid rumours that it could also be targeted by a US predator. However, well-informed dealers said that there were other reasons for PowerGen's surge. The company was said to have briefed analysts about its much-rumoured US acquisition and some market watchers believe something could happen quite soon.

British Energy, up 14.5p to 466p on the inevitable takeover talk, completed the power stocks' glorious day.

Fellow utility Centrica firmed 0.75p to 167p after the members of the Automobile Association agreed to be taken over.

The rest of the blue-chip index lacked energy and closed 53.1 lower at 6,014.6 - a five-week low - after another volatile session.

The market is nervous about today's expiry of the September futures contracts. The next series of derivatives contracts is the March 2000 one and several investors are believed to be scared of rolling over their positions into the new millennium due to the Y2K problem.

A hurricane-hit Wall Street contributed to dampen sentiment as the Dow followed its recent losses with another 100-plus opening fall. The smaller indexes had another awful day, with the FTSE 250 plunging 47.6 to 5,838.2 and the Small Cap ending 39.5 lower at 2,762.8 as investors continued to flee illiquid second liners.

The blue-chip rout would have been worse had it not been for a jump in BT, which accounts for around 5 per cent of the FTSE 100. The telecoms group climbed 33p to 922p after clinching a global mobile phone alliance with US giant AT&T.

The tie-up should boost the performance of BT's cellular phone offshoot, Cellnet. Rival Orange squeezed 22.5p higher to 1,114p as broker Dresdner said "buy" after a one-to-one meeting. Orange was said to have painted an upbeat picture of its wireless data technology. No such luck for Colt Telecom, 71p lower to 1,205p as US investors bailed out.

Drinks group Diageo fizzed 19.5p higher to 636p after good maiden final results. The company has apparently told analysts that it is looking at a buy in the food industry. Insurer CGU rose 27.5p to 950p as rumours of a merger between German rival Allianz and France's SocGen reawakened hopes of sector consolidation.

Advertising agencies were hit by the rumoured decision by US consumer giant Procter & Gamble to link their pay to products' sales. WPP plummeted 36p to 572.5p, Cordiant slid 8p to 165.5p, while Saatchi, one of P&G's advertisers, lost 8p to 212p. British Aerospace, 26.75p lower to 437p despite in-line interims, was shot down by a delay in its Marconi acquisition and fears of dwindling aircraft sales. Meanwhile, packaging midcapper Rexam wrapped up a 15p rise to 284p in good volume. There is some talk of a forthcoming disposal of its pharmaceutical carton division and of its paperback books operations, prior to a pounds 1bn-plus buy. Talk of a break- up bid by aggressive fund UK Active Value was also heard.

A push by WestLB Panmure helped engineers FKI, 10p higher at 194p, BBA, 14,5p better at 466p and TI, up 10p to 478p. The broker believes the midcap trio is undervalued. Sugar-maker Tate & Lyle rose a sweet 19.75p to 389p ahead of a forthcoming analysts' presentation, while bid rumours returned to chemical group Laporte, 23p better at 623p. Manchester United was kicked 7p higher to 218p on revived talk of a stake purchase from Granada, 10.5p higher at 553p, or a group of Jersey-based investors.

Among the minnows, AIM-listed broker Durlacher jumped 112p to 4,150p after good finals. The broker plans to move to the main market and some experts believe that its investments in Internet companies could value the stock at up to pounds 65.

Imagination Technologies, the old Videologic, dropped 6.5p to 92.5p, despite whispers of a contract with Symbian, the mobile consortium which includes Nokia, Ericsson and Psion, 26.5p lower to 880p after a slump in interim profits.

Mining minnow Cambridge Mineral Resources shone 1.5p higher to 17.5p on news of a possible diamond find in Donegal. However, software group MSW slumped13.5p to an 80p record-low after swinging into an interim loss, while biotech tiddler Oxford Instruments fell 25p to 202.5p after a profit warning.

SEAQ VOLUME: 1.03bn

SEAQ TRADES: 76,684

GILTS INDEX: 103.62 +0.47

THE BIOTECH group Scotia Holdings was10p higher to a 12-month high of 154p on optimism about its star product - the neck- cancer drug Foscan. The company will submit the drug to the US regulator by the end of the month and punters believe authorities could grant it a "fast-track" approval. Other whispers suggest Scotia is close to a licensing deal. The company is believed to be in talks with three pharma giants, possibly including Glaxo Wellcome.

THE BEARS are climbing aboard the bus group Stagecoach. The stock travelled 1.5p lower to 191p yesterday as rumours of a strike at its Manchester subsidiary circulated. Mancunian punters said thousands of commuters were left stranded yesterday as Stagecoach buses failed to turn up. According to some estimates, if the strike continues for the next few weeks the bus company could end losing up to pounds 1m a day.