Weekly stock market round-up

Morrisons, which hasn’t made an acquisition since 1979, hopes the money it can save from combining the two supply chains will increase profits, and the deal also allows the group to expand more quickly in the south of England, where suitable sites are hard to find.

But it’s a highly ambitious takeover, increasing the number of stores from 120 to 600 at a stroke, and many are worried that the group is biting off more than it can chew. Safeway shareholders are now waiting with baited breath to see if Wal-Mart, the US retailer that broke up Asda’s merger with Kingfisher in 1999, will counter-bid.

Meanwhile, there’s blood on the High Street after Dixons, the UK’s leading electrical retailer, said Christmas trading had been disappointing and full-year profits will be less than once thought as a result. The news has increased anxiety about the sector’s prospects generally and few retail shares are likely to rise under such conditions, irrespective of how good trading is. Next, Selfridges, House of Fraser and Peacocks have all reported on Christmas trading.

Britannic, the insurance company, shocked its customers by telling them there will be no bonuses at all on with-profits policies for 2002. Shareholders in the group don’t fare much better: they’ll get no dividend, because the company needs to pump more money into its reserves to cover longer life expectancies. The shares halved on the news and other big names like Prudential and CGNU, now called Aviva, also took a knock. The entire sector is unlikely to make much headway until equity markets stabilise, although there’s little risk of the big players going bust.

The controversial project to part-privatise London’s Underground took a step forward with news that one of the two consortia involved has reached a definitive agreement with the government. Of the consortium’s three members, two are British. Jarvis should do well, but troubled Amey may well not be around long enough to collect the spoils.

Mining giant BHP Billiton has lost its chief executive, Brian Gilbertson, who resigned owing to ‘irreconcilable differences’ with the other board members. The company isn’t giving much away, but it seems he wanted to do more acquisitions and they didn’t. There are also whispers of tension between Mr Gilbertson, who is South African, and his mainly Australian colleagues.

Packaging group Rexam is planning to get bigger in glass packaging, complementing its dominant position in cans. It’s buying a German glassworks for £33m, having acquired another such company last year for £68m. It’s also topping up its finances by raising £85m or so from a new share issue.