The prospect of more mega-mergers among global oil companies and a flurry of domestic takeover deals reignited London's equity market yesterday. The market had shown distinct signs of running out of steam over the previous two sessions, with stock prices wilting in the face of persistent profit-taking which gnawed away at some of the excellent gains of the past week.
Reports that Exxon and Mobil, the two biggest oil companies in the US, are involved in talks that could lead to Exxon snapping up Mobil saw British shares recover from an initial bout of uncertainty and recross the 5,800 level. Dealers in London said the Exxon/Mobil story would inject fresh strength into a US stock market already riding on the crest of a wave and also lifted by recent takeover action, specifically news of the Deutsche Bank/Bankers Trust bid talks.
Adding to the bullish mood of the market was the latest burst of takeover activity among British stocks. That included a £262 million bid for Marston Thompson & Evershed from fellow brewer Wolverhampton and Dudley. Marston's gained 41p to 287 1/2p - a 17 per cent jump way beyond the offer price which is equivalent to 283 1/2p a share. Dealers expected further bids to come.
The predator fell 5p to 425p, while merger hopes shook up bigger rivals like Bass, up 60p to 850p, Whitbread up 35p at 825p and Scottish & Newcastle up 17p to 743p. Meanwhile, there were other bid approaches to Abbott Mead
Vickers, the advertising agency, and to BCH, the vehicle financing group.
And there was a dramatic finale to the London session with a reverse takeover offer from John Mansfield for Marley, the building materials group, which has long been seen as a potential target.
All that bid news brought a renewal of the market's euphoria and saw the FTSE-100 advance strongly to finish a session of unexpectedly good turnover levels a net 72.6 higher at 5,827.9. At its best, only minutes before the close of the session, the index was on the threshold of a three-figure gain, but dipped sharply as more flurries of profit-taking hit the market.
The steepling gains in the leaders were not replicated by the FTSE Mid-250 and FTSE SmallCap stocks, but both indices managed to record good gains on the day.
The Mid-250 index settled 14.5 higher at 4,940.9, just a shade off the day's best, while the SmallCap was finally 5.4 to the good at 2,067.6.
The takeover euphoria tended to overwhelm other news which would normally have affected the market. The latest Confederation of British Industry survey of industrial trends was every bit as gloomy as most commentators expected.
And dealers noted comments made to the Treasury Select Committee by Mr Willem Buiter, a member of the Bank of England's monetary policy committee, that the "risks" to the London stock market were "on the downside" and that it was "very hard to rationalise these price-earnings multiples".
Mr Richard Jeffrey, group economist at CCF Charterhouse, said: "By cutting interest rates, the monetary policy committee has persuaded investors to become less risk-averse."
And the strategy team at BT Alex Brown said: "The market is due a period of consolidation. But given that we think policy will be eased if the economy weakens, then the market is also reasonably well under-pinned." Shares in Marks & Spencer fell badly following its announcement that chairman and chief executive Sir Richard Greenbury had succeeded in holding on to the chairmanship of the company. Although the board has appointed a new chief executive in Mr Peter Salsbury, the City was disappointed because he was clearly Sir Richard's favourite for the post. Many had hoped for a new face to turn around the company's fortunes. Shares in the retailer fell 241/2p to 421p on the news as some mourned the passing of Mr Salsbury's rival Mr Keith Oates, who will take early retirement.
