America tightens its stranglehold on British utilities

MARKET REPORT

American interest continues to develop in Britain's remaining independent power groups. As US group CE Electric took its stake in target Northern Electric to 29.45 per cent, rumours began to surface that a transatlantic battle could emerge for East Midlands Electricity.

It seems many of the speculators who some weeks ago identified East Midlands as the likely US takeover fodder were more than a little surprised when Dominion Resources revealed it might make a bid at a decidedly ungenerous 608p a share.

They had been expecting another predator to appear - a company called CMS Energy, operating in Michigan.

It is unclear whether Dominion has achieved a pre-emptive strike and CMS will look elsewhere. Although East Midlands shares were little changed, up 1p at 593.5p, there remains a strong body of opinion that CMS will continue the chase, offering around 700p a share, probably on Tuesday. CE Electric's buying left Northern down 18p to 605.5p.

Waters remained firm, partly on bid hopes. Thames led the way with an 8p gain to 561.5p.

The rest of the stock market failed to hold its full early promise. New York's overnight record provoked early excitement but at the close Footsie was struggling to hang on to a 10.4-point gain at 3,910.8. Worries about interest rates, sterling's strength and the unease in the government stocks market contributed to the caution.

Volume was again thin with the second half of the 110 million tax-effective bed-and-breakfast deal in British Gas inflating the day's total to 768.2 million.

British Steel gained 4p to 171p ahead of Monday's interim results which could be accompanied by a share buy back or special dividend. In a remarkable move Lehman Brothers has acquired ADRs, amounting to nearly 4.8 per cent of the group.

Allied Domecq, with figures on Tuesday, rose 8.5p to 484.5p on hopes the chairman, Sir Christopher Hogg, will provide details of the retailing and spirits demerger.

Unilever, the Anglo-Dutch giant, achieved its best gain for a long while, leading other blue chips with a 71.5p gain to 1,346.5p following results.

Airtours, the holidays group, managed to claw back some of the altitude lost following Thursday's referral to the Monopolies and Mergers Commission. With NatWest Securities categorising the shares as a hold the price moved up 18.5p to 670p. A year ago the shares were 309p.

British Biotech gained 16.5p to 230p as long-time fan Ian White, analyst at Robert Fleming Securities, described the shares as a "strong buy". He believes the market has misinterpreted the recent data on its Marimastat cancer drug and expects favourable news soon on Lexipafant, a pancreatitis treatment.

Cortecs International rose 9.5p to 205p ahead of a rumoured research update and Celsis International put on 3.5p to 103p as its rights issue attracted an 81.8 per cent take-up. Stockbroker Panmure Gordon placed the rump. The pounds 11.1m cash call was to help fund the takeover of Lumac, a microbial testing firm.

Senior Engineering lost 7p to 114.5p after it emerged that its pounds 28m disposal of its thermal engineering company had not been completed. The group remains hopeful the deal will go through.

Frost, the petrol retailer, added 3.5p to 146p, its highest since April. With the petrol forecourt price war fading rapidly the group's prospects are being upgraded and there is talk one house, thought to be Kleinwort Benson, has put a 175p target on the shares.

Enterprise Oil fared well in a strong oil sector, gaining 14.5p to 546.5p as Goldman Sachs took a fancy to the shares. British Petroleum, up 11p at 645p, enjoyed Salomon Brothers backing. Tullow Oil rose 6p to 83p, largely on takeover speculation.

Reliance, the security group, crashed 60p to 120p following a profit warning; Roxboro, the electrical components business, fused, falling 79.5p to 123p as it issued another profit warning.

Waverley Mining Finance added 5.5p to 64.5p on the Williams de Broe support.

Jarvis, the construction and rail maintenance group, advanced a further 5.5p to 131.5p and Hansom, the taxi firm, reversed 7p to 10.5p after announcing a pounds 1.58m placing and open offer at 5.5p.

Chelsea Village had an erratic session, scoring a 9p gain to 105.5p. Scrappy selling lowered Brown & Jackson, the Poundstretcher chain, 4p to 12.5p. Beaufort, a business services group, held at 4p against Thursday's 3p placing.

TAKING STOCK

Middlesex Holdings, the metals group, stuck at 6.25p, its year's low. Lord Owen, the former politician who became chairman a year ago, has doubled his shareholding to 2 million shares, paying 6.125p. The company operates mainly in Russia, where its chief executive and largest shareholder, Masoud Alikhani, has established close business links. Its activities also spread over coal, gold and oil.

Black Arrow, the office equipment firm, reached a year's high with a 4.5p gain to 67p. There are whispers of bid action with some discreet but determined buying.

Psion's range of hand-held computers are a "stunning success", says Merrill Lynch, forecasting a pounds 5m profits gain to pounds 15.7m. The shares were little changed at 416.5p.