MARKET REPORT

Thorn gets lead role in Disney takeover talk

Takeover speculation relieved the tedium of a lacklustre stock market.

Stories Walt Disney was about to strike at Thorn EMI, and Merrill Lynch or Swiss Bank Corporation at SG Warburg captured the imagination. Thorn jumped 28p to 1,137p and Warburg 20p to 769p.

Disney was said to be attracted by Thorn's music division. It was, ran the story, prepared to bid for the music operation and if rebuffed would be prepared to launch a takeover bid for the group.

The US group is thought to be anxious to expand its music side, which is largely focused on soundtracks from its films.

But with the music arm representing nearly 70 per cent of Thorn's profits, chairman Sir Colin Southgate is likely to resist the Disney blandishments. He could feel he would be inviting takeover trouble for the resultant cash-rich group if he bowed to any Disney approach for the music side.

Warburg has been in the takeover frame since its planned merger with US group Morgan Stanley was aborted. The securities house has, it is reasoned, put itself up for sale through its MS flirtation.

Speculation is likely to intensify ahead of results, currently expected in mid-May but likely, it is rumoured, to be brought forward to next week.

The bank has had a miserable time since the MS talks were terminated. Redundancies have already hit morale and the atmosphere at its City headquarters will not be helped as bonuses are cut sharply with profits expected to be £130m against £297m.

The theory is that any bidder, friendly or hostile, will move at, or near, the results announcement. Merrill was reported to have denied any Warburg ambition but its reluctance made little impression. Hambros, up 9p at 214p, and Kleinwort Benson, 5p at 643p, also moved ahead.

The market spent much of the session clinging unconvincingly to modest gains, but went into retreat once US economic data reawakened higher transatlantic interest-rate worries. At the close the FT-SE 100 index was off 0.9 points at 3,216.7.

Overall sentiment remained strong. The market appears to have accepted the possibility of a domestic interest-rate increase once the local elections are out of the way.

British Steel had another busy session, with big trades going through at 170p. The shares achieved a closing high, 169p, up 3.5p. Higher steel prices , prompting analysts to upgrade, have sparked off the excitement and, just to keep the market on the boil, there is vague talk of corporate action.

Chocolate was in demand. Cadbury Schweppes rose 10p to 447.5p with US buying said to be responsible; Thorntons, on speculative interest, added 15p to 173p.

Reuters dipped 11.5p to 472.5p on a forecast slowdown in revenue growth, but television shares remained upbeat on possible media changes and the bustling over Channel 5.

Coal Investments held at 112p after investment presentations which prompted profit upgradings.

Mercury Asset Management turned out to be the big seller of Christies International, the auctioneer. It still has 18.39 per cent. The shares slipped 10p to 156p.

Engineer James Dickie rose 13p to 230p. It has acquired Belcot, a press tools maker, and is raising £3.6m through a placing and open offer.

The FT-SE index closed 0.9 points down at 3,216.7 but the supporting FT-SE 250 index gained four points to 3,530.2. Turnover was 780 million shares from 23,678 bargains. Gilts lost early gains.

United Industries, an engineering group that struggled back to profits after four years in the red, held at 15.5p as BBA, the industrial group, sold its 21.23 per cent interest. Smith New Court placed the shares with institutions at 15p. BBA helped kick-start United by injecting three of its operations in exchange for shares in March last year.

A US bid could be on the way for Associated British Industries, a wax and oil adhesive distributor and producer. A newly formed company related to a Los Angeles investment group, Aurora Capital Partners, could, it is indicated, make a cash and unquoted share offer. The deal would price the group at £40m. Its shares, traded on the backwater 4.2 market, held at 417p.