Break-up talk lifts British Gas out of the doldrums

Break-up talk intrigued the stock market with such diverse groups as British Gas and Grand Metropolitan commanding centre stage.

British Gas, deep in the doldrums in recent weeks, flared 7.5p to 236.5p in busy trading; Grandmet enjoyed a late flurry, finishing 12.5p higher at 445.5p.

In early trading the market was braced for a downbeat BG statement. In the event the gas group contented itself with withdrawing from the Government's Charter Mark scheme, a humiliating move but not the damaging profit warning some feared.

Then the break up talk started to gain ground, with suggestions of an ultimate value approaching 290p a share. With an inviting 7.9 per cent dividend yield providing a further prop the shares scored the best blue- chip gain of the day.

It was all in sharp contract to the wretched performance that had the shares slithering to a five-year low. Earlier this year they were 317.5p.

Grandmet, the food and drink group, traded quietly for most of the session. Then US buying and the added confusion of a split order transformed the scene.

There was said to be some big orders in the pipeline and the possibility of a highly leveraged US break-up bid was put back in the frame.

Peter Lucas, at Credit Lyonnais Laing, estimates that Grandmet's break- up worth, based on US calculations, at 550p a share.

Grandmet has, in recent months, been the subject of intense speculation; some have suggested that Ian Martin, its former chief executive, with Kohlberg Kravis Roberts, the US break-up specialist, is trying to put together a deal.

Just how much the split buying order - "it was sprayed around the market", said one dealer - distorted trading could become clearer today.

For the fourth day running shares made headway with the FT-SE 100 index up 4.5 points to 3,541.6 in often brisk trading. But many were disappointed that New York's record-breaking overnight performance did not draw a more positive response.

The gap between London and New York yawns ever wider with shares content to fall on transatlantic weakness but reluctant to follow the US into strength.

Electricals retained a little of their take over glow but waters came off the boil. It was left to Zeneca to keep the bid excitement flowing, gaining 21p to 1,219p, a peak.

On the insurance pitch London & Manchester, up 22p to 413p, took over the speculative role from the likes of Legal & General, off 9p at 666p.

Societe Generale Strauss Turnbull says: "We do not believe a bid would pay more than 800p and we consider any bid at all extremely unlikely. Without one, the shares are at least 100p too expensive."

Liverpool Victoria, a mutual group, is said to be the most likely L&M bidder.

Ladbroke, with a dire profit warning, crashed 22p to 134p (after 128p), but Burton's figures lifted the shares 5p to 110p.

The succession debate at GEC and the sudden departure of Richard Reynolds, produced a 3.5p gain to 219.5p. Reports of regional aircraft sales to Saudia Arabia and lingering hopes of GEC interest put British Aerospace 9p higher at 734p.

Dixons gained 15p to 414p on its analysts meeting and Allied Domecq weakened 7p to 488p as the Mexican peso came under pressure again.

Glaxo Wellcome fell 18p to 857p as a court ruling, thought to involve up to a pounds 400m, went in favour of the Inland Revenue. An appeal is likely.

Matthew Clark, the drinks group, rose 18p to 662p after Panmure Gordon placed 18.2 per cent, stemming from its bid for Taunton Cider, at 645p. The placing was four times subscribed.

VidoeLogic jumped 5p to 38p in busy trading following a computer chip deal; Micro Focus surged 88p to 648p with a third-quarter loss brushed aside as the market concentrated on prospects and proposed management changes.

SuperscapeVR, another computer group, gained 28p to 444p with its nil- paid rights (it is raising pounds 8.7m) up 28p at 114p. They were 46p on Monday.

Dorling Kindersley, the CD-Rom publisher, fell 26p to 510p after Microsoft said it intended to sell its 17.9 per cent stake.

Unipalm gained 334p to 627p, reflecting the progress of the shares of bidder UUNET. Its offer now values Unipalm at near 690p.

Black & Edgington, where a significant drugs deal is still awaited, climbed 1.25p to 8p as Steve Harris, formerly of Medeva, joined the board.

TAKING STOCK

r Enviromed, the hard-pressed health care group, gained 2p to 28p as takeover speculation mounted. EN Limited Partnership, which features Ron Zwanziger, a former director, has been picking up shares persistently this week and has 13.3 per cent. Mr. Zwanziger is thought to have made unsuccessful attempts to buy part of the business earlier this year. Enviromed was involved in takeover talks that failed to produce a bid in the summer. The shares have risen 9p this week.

r ERA, the retailer taking in the Beatties and Techno chains, has been busily traded with the shares firming to 10.25p. There is said to be interest developing on Christmas trading hopes but with the shares looking so bombed- out the inevitable takeover gossip is in the air.