Utilities in spotlight as ScottishPower bids for Water

MARKET REPORT

The Whitehall go-ahead for ScottishPower's audacious pounds 1.7bn takeover for Southern Water redirected the bid spotlight onto utilities, recently weighed down by political and regulatory worries.

Since a round of deals decimated the ranks of regional electricity companies and sent ripples through the water industry the remaining utilities have drifted quietly.

The clearance of the ScottishPower offer could, however, reawaken bid interest. There is a suspicion American influences are monitoring East Midlands Electricity, up 4p at 550p. And London Electricity edged ahead 9p to 604p.

ScottishPower is paying a fancy price for Southern Water, up 28p to 1,054p. The deal will create Britain's first multi-utility, spanning the generating and distribution of electricity and embracing water, gas and telecommunications. Southern Electric, outbid by ScottishPower for its watery colleague, was firmer at 658p. It has to grow or suffer a take over assault with ScottishPower one of the possible predators.

Wessex Water, up 4p at 358p, has been rumoured as a possible Southern Electric target. But it has its own agenda. It has put in a bid for the troubled South West Water; so has Severn Trent. Both offers are being studied by the Monopolies & Mergers Commission.

The stock market shrugged off New York weakness and although best levels were not held, managed to close with the FT-SE 100 index up 17.1 points at 3,710.5. The supporting 250 index achieved a 24.8 gain to 4,250. Once again volume was low with little evidence of any significant investor interest.

Bids for second liners stole the show. Innovations, the home selling group, jumped 101p to 313p as Burton, the retailer, emerged as the mystery suitor with a pounds 44.9m share offer. The shares were 185p on Wednesday. Burton, the best performing blue chip, gained 6.75p to 151.5p on an encouraging trading statement.

The Innovations deal and the upbeat trading report prompted suggestions the once ailing retailer could be the next Next, the fashion group once deep in the dumps with its shares in single figures. They were unchanged at 529p.

Rainford, an electrical components group, added 20p to 335p as a US group came along with an pounds 80m offer. When an approach was confirmed the shares were 228p.

Lasmo, the oil group, continued to enjoy relief that its Algerian production deal had at last been concluded, gaining 4p to 184p.

Yorkshire-Tyne Tees Television jumped 33p to 1,248p as Granada takeover stories re-appeared. The warrants rose 12p to 1,040p. Christies International, the auctioneer, gained 4p to 222p as the market debated the intentions of major shareholder Joseph Lewis.

Lucas Industries had a busy session, up 5p at 221p. The shares strengthened on the lifting of a US contracts ban. Suggestions there will be a counter to the proposed merger with the US Varity car parts group still go the rounds.

Royal & Sun Alliance, the new insurance giant, made a firm debut, up 5.5p to 370.5p. Railtrack greeted its membership of Footsie with a 1p fall to 213p.

Zeneca was up 13p to 1,396p on Merrill Lynch support; an SBC Warburg recommendation lifted Barclays, the banking group, 10p to 802p.

Alizyme, the new issue drugs flop, remained sick, touching 46p before rallying to 51p, against a 60p placing.

FW Thorpe, a lighting group, lost 36p to 173p on a profit warning and PCT, a power tool distributor, rose 10p to 125p as major shareholders bid 130p a share to take the USM company private.

Greycoat, the property group, added 6.5p to 139.5p; James Capel completed a 5 per cent share buyback at 140p.

Marston Thompson & Evershed remained subdued over worries it had overpaid for the Pitcher & Piano bars chain but Greene King, splashing out pounds 197.5m for The Magic Pub Co rallied after weakness, gaining 7p to 594p.

Pex, the textile group which has moved back into profit, rose a further 2p to 8.5p.

Dana Petroleum gained 1p to 19.5p as, for the second time this week, it raised cash through a share placing. It is buying a 5 per cent interest in a Russian oil and gas company for pounds 1.7m. The cash element of the deal and other cash needs will be met by a placing. On Wednesday a placing raised nearly pounds 4m.

BCE, the computer games group, gained 1.75p to 18p following comments on AutoNomy's internet search system. BCE has an 8.3 per cent stake and English National Investment Co an option on a 20.1 per cent interest. ENIC rose 2p to 84p.

TAKING STOCK

rJarvis, the construction group which won one of the prized British Rail maintenance companies, edged forward to 84p. There are suggestions it could soon be on the receiving end of a bid with Taylor Woodrow, off 1p at 163p, said to be interested. Jarvis shares have climbed from 16.5p in the past year, largely on its railways deal.

rHanover International Hotels, unchanged at 141p, is thought to be near to making a major hotel acquisition. A group of five provincial hotels is in its sights but any deal would probably require a rights issue.

rBS, the leisure group, climbed 15p to 185p, a 12 month high, on talk of corporate action. The company has suffered from boardroom in-fighting and recently lost chairman Bryan Burleston.