Lucas Industries takes off on takeover rumours

MARKET REPORT

In heavy trading Lucas Industries, the aerospace and car components group, motored 11p to 234p as rumours of a takeover bid swirled around the stock market.

According to the rumour mill action would occur early next week with GM, the US giant, favourite to strike.

Lucas shares have been heavily traded this week, a classic indication that corporate action is suspected.

But yesterday's speculation prompted the inevitable question following a Friday run - is it a ramp?

So often, as the market winds down for the weekend break, stories of an imminent bid go the rounds. Often the company concerned is already in the bid frame.

United Biscuits is one which has experienced the Friday ramp. Its shares soared in busy trading as stories swirled a predator was about to swoop. UB's shares were soon back to their old crumbly form as trading continued to deteriorate and the rumoured bidder failed to emerge.

Earlier this week it became known Lucas was engaged in talks with a US group, Varity. Object was to establish a trading pact. The negotiations could stretch to a full merger although Varity is too small to mount a bid for Lucas; so the UK group would have to make the running.

In the market, however, the talks were seen as an indication Lucas realises it is too small to prosper on the world stage and needs a partner.

The French Valeo group could be interested although it is unlikely to be in a position to move until the ownership of a 30 per cent shareholding is resolved. At one time Lucas was seen as a possible buyer.

Besides GM, which would have little trouble absorbing Lucas and could regard a takeover as a logical bolt on, the UK groups, GKN and TI Group, are in the frame. T&N, if it could resolve its asbestos difficulties, could also be a partner.

GKN eased 4p to 958p and TI 6p to 546p. T&N was little changed at 175p. Lucas, with a 260p rumoured bid price, has climbed from 172p in January.

The rest of the market was in buoyant form with the FT-SE 100 index going some way towards nullifying the poor start to the month, gaining 26.1 points to 3,754.4.

British Gas was the best performing blue chip, scoring a 9p advance to 228p on the appointment of its demerger bosses.

Electricities dimmed on the latest Board of Trade U-turn but the English generators, National Power and PowerGen, gained 2p - to 535p and 544p respectively.

Hambros, the merchant bank, shaded 2p to 237p although UBS lifted its takeover price from 271p to 303p.

After its breathtaking arrival Vanguard Medica held at 628p with a string of delayed trades going through at 620p. Celltech, the drugs group which caused unease by scrapping its asthma drug in February, continued its recent heady run, gaining 25p to 653p. It is within 30p of its level before the asthma setback.

Zeneca's upbeat trading statement lifted the shares 11p to 1,377p but Chiroscience, where a pounds 40.3m cash raising exercise is underway, fell 15p to 485p.

FirstBus, on its Glasgow buy, advanced 6p to 174p and Eurotunnel, seemingly on French investment support,managed a 6p gain, to 82.5p.

Superstores continued to rally following the J Sainsbury performance and oils were helped by the Shell display although British Petroleum bucked the trend, off 6p at 563p.

Tullow Oil was unchanged at 90.5p in busy trading on talk of a British Gas strike and Bakyrchik gained 17p to 550p on gold price optimism.

Eidos fell a further 15p to 808p on worries about delays over its video telephone and SuperscapeVR gave up 7p to 628p on director selling. VideoLogic gained another 6p to 94p on its super-fast video chips deal.

Raphael Zorn Hemsley, the stockbroker, jumped 11p to 49p following figures and Oriel, the insurance broker, rose 13p to 155p as takeover talks continued.

Cantors, the Sheffield-based furniture retailer, put on 5p to 160p; it is in talks which could lead to a substantial acquisition.

Rodime fell 0.75p to 2.5p. The former computer group is now a litigation play; it has suspended one US action to concentrate on its claim against US group Seagate.

Ask Central, a small restaurant chain, improved 12p to 120p where it sells at more than 60 times last year's earnings. The company is controlled by the Kaye family which created City Centre Restaurants and earlier built and then sold two restaurant chains.

TAKING STOCK

Expect developments at Emerald Energy, the USM-traded group. It is thought to be seeking to reduce its reliance on the US and negotiating to buy exploration and production facilities in Colombia. A cash raising exercise is likely to accompany any deals. The company came to the market 30 months ago with Peter Winton, former exploration chief at Tricentrol, as managing director. Until now it has concentrated on developing resources in the US. The shares held at 1.75p.

Megalomedia, headed by Maurice Saatchi, has bought nearly 7 per cent of unquoted Cybercafe for pounds 250,000. Started as an Internet access cafe based in London nearly two years ago, Cybercafe has grown to six operations - in the UK, Paris and Tokyo. Megalomedia held at 89p.