Second-liners advance amid takeover speculation

Leading shares were in the shadow of second-line stocks yesterday. The FT-SE 250 index closed advanced 7.5 points to an all-time high of 3,991.3 amid rumours that several takeover bids were about to be unleashed, particularly in the pub retailing and oil sectors.

An advance of 0.3 of a point to 3,544.4 was recorded by the FT-SE 100 index. Only two of the top 100 shares managed double-digit gains: life group Legal & General, which rose 15.5p to 616.5p, and General Accident, the composite insurer, up 14p to 6.32p. Again, the driving force was speculation.

A merger between the two is seen as more of a possibility rather than a straight takeover bid by one for the other. Speculation about a foreign buyer for L&G has also surfaced in recent months.

Total volume trading topped 1 billion shares, one of the best levels seen for many weeks. Some 21 per cent of the total figure, however, related to Rhone Poulenc's raid on shares in Fisons after it increased its takeover terms from 240p to 265p.

The first of the expected fresh wave of bids to roll off the production lines, however, may be for Boddington, the Manchester-based pub and leisure company. Greenalls, the rival North West pub operator, is the hot favourite to make an all-share offer valuing Boddington at around pounds 500m.

Boddington yesterday had to announce it was in bid talks as its shares soared during reasonably heavy trading for what is a tightly-held stock. The price closed 86p higher at 358p, comfortably above the year's high of 295p.

There was also a separate rumour that Vaux, the Sunderland-based regional brewer, pubs and hotel operator may also find itself on the receiving end of a bid. Wolverhampton & Dudley, based in the Midlands but also the owner of the North-East Camerons brewery, is the favoured suitor. Wolverhampton's shares advanced 8p to 547p and Vaux gained 15p to 300p, which values the company at more than pounds 420m.

These potential deals are all seen as being part and parcel of the inevitable consolidation of the pub and brewing industries. Additional evidence of the process was yesterday provided by Allied Domecq, down 6p 526p, which announced the closure of its brewery of Warrington, part of its joint venture with Carlsberg of Denmark.

The excitement about Boddington and Vaux lifted Greene King, best known for its Abbot and Greene King IPA beers, by 41p to 633p - just 2p below its year's high. Greene King is struggling to make money from brewing outside its East Anglia heartland. Competition in the free-trade is fierce, and wholesale prices of beers are being kept low by an ongoing fight by the big brewers for market share.

A flurry of bid activity in the sector could be good news for the string of pub companies lining up to float on the stock market. They include Enterprise Inns, Tom Cobleigh, and Century Inns.

Fresh news on how the independent pub operators are performing will be provided today by results from JD Wetherspoon, up 3p to 633p. Regent Inns, which floated not long after Wetherspoon a couple of years ago, yesterday climbed to another high with a 12p rise to 600p.

Takeover talk was not only confined to the pub and brewing sector. There was speculation that Atlantic Richfield was poised to increase its aggressive pounds 160m, 61p a share offer for Aran Energy to between 70p and 75p.

The oil sector is also viewed by analysts as being ripe for consolidation, particularly in the light of steady crude oil price over the last couple of years. Top of the list of speculative favourites are Premier Oil, 0.5p firmer at 28.5p, and Clyde Petroleum. Shares in Clyde, seen as a takeover target for Monument Oil & Gas, are trading at 55p. Hardy Oil & Gas, rumoured as another bid candidate, continued its recent strong run with a 4p gain to a year's high of 195p.

British Steel was one of the biggest fallers among the heavyweight division, dropping 5.75p to 175.25p. Trading was heavy with almost 14 million going through the books.

Damage was mainly caused by analysts at SBC Warburg predicting the company would have to cut its dividend payments next year from 12.5p to 10p.

There were also reports that two other leading broking houses were preparing to downgrade expectations.

Amstrad shares were in demand, closing 12.5p higher at 268.5p on the back of its latest results and a hint from Alan Sugar, the chairman, that it may soon spend its pounds 140m pot of cash on more acquisitions.