Zeneca stirs bid speculation

Zeneca has stirred up the increasingly feverish Wellcome white-knight speculation by declining to deny rumours that it is poised to trump Glaxo's £9bn bid for the pharmaceuticals company.

Sir Denys Henderson, who presented his final ICI results as chairman last week and did the same for Zeneca yesterday, would only say that Zeneca never commented on market rumours. The ambiguity sent Wellcome's shares 8p higher to 1,036p and knocked 14p from Zeneca's, which closed at 866p.

The City remained sceptical that Wellcome would come forward with a higher bid and the shares remained 10p below the value of Glaxo's cash and shares offer.

That view was backed up by a firm denial from Bayer, the German chemicals company, that it was involved in a deal with Zeneca. The story suggested that Bayer would take over Zeneca's agrochemicals and speciality chemicals arms to provide the British company with some of the firepower to take out Wellcome.

If Zeneca were to bid for Wellcome it would contradict recent comments from the company. Yesterday David Barnes, chief executive, restated his view that Zeneca did not need to make an acquisition, and analysts agreed that its drugs pipeline was better than most in the sector.

Bid speculation distracted attention from Zeneca's first full-year figures since its demerger from ICI in June 1993. As expected, they showed strong underlying profits growth, although most of the benefit was diluted by the extra shares issued as part of Zeneca's £1.6bn rights issue soon after demerger.

Profits before execeptional items rose 23 per cent to £763m, with all three divisions showing improvement. The £100m provision announced at the halfway mark for rationalisation in agrochemicals and speciality chemicals increased to £138m, which limited pre-tax profits to a 4 per cent rise to £659m (£633m).

Because of the greater number of shares in issue, earnings per share fell from 50.7p to 46.8p but the dividend rose 1p to 28.5p.

In pharmaceuticals, which accounts for more than three-quarters of trading profits, growing sales of Zeneca's new drugs, Zestril, Zoladex and Diprivan, more than made up for the forecast decline in the heart drug Tenormin.