BusinessCompany NewsWeekly stock market round-up

Weekly stock market round-up

Wm Morrison's bid for control of rival Safeway last week is turning into a battle royale, with Sainsbury's and Asda both now weighing in with competing bids.

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Safeway shares have rocketed as a result. But it might not be quite so simple. If Sainsbury or Asda bought Safeway, there would be three massively powerful supermarket groups.

Both groups think they can get allay these concerns by selling stores in areas where there is a local monopoly. But competition authorities, mindful of supermarkets’ buying power and their alleged bullying of suppliers and farmers, might need more convincing. A full enquiry into the bids could take months. Morrisons’ all-share offer is worth the least, but faces the fewest competition worries. Asda has the deepest pockets, and is likely to pay all cash, but faces regulatory risks. Safeway shareholders should sit tight for now.

Cable & Wireless shares have rallied strongly after it appointed a new chairman. It is thought that Richard Lapthorne, formerly of biotech firm Amersham, could decide to sack C&W’s chief executive, Graham Wallace, and appoint someone with a strategy more to the City’s liking.

BP is selling its stake in the Forties oilfield in the North Sea, once the country’s biggest but now in gradual decline. The price for that and some other fields in the Gulf of Mexico is $1.3bn, and the buyer is an independent American company. More disposals are likely as the company focuses on the big projects of the future, rather than those of the past.

The past week has seen, as is customary at this time of year, a flood of trading statements from listed retailers. Some make as much as half their profit over Christmas. The results have been very mixed. Among the winners were Marks & Spencer, GUS (owner of Argos), and Woolworths, which managed a big improvement on last year’s disaster. Indifferent performances from Matalan, Debenhams, Body Shop and Next. Profit warnings came from Austin Reed, Mothercare and JD Sports, while House of Fraser, HMV and Game Group did better than initial expectations.

Aviva, the life assurer formed from the merger of CGNU and Norwich Union, is to slash annual paymnts to with-profit policyholders. This is obviously bad news for them, but shareholders should not be complacent either. Britannic recently axed its dividend and Prudential may be forced to cut its payout. Legal & General looks the best placed of the bunch.

Privatised water companies may be allowed to raise their prices when the next price control regime comes into force in 2005. The water regulator is likely to demand more efficiency and environmental improvements, however, and dividend cover in the sector is already wafer thin (meaning companies are only just making enough profit to pay dividends).

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