Germans target Stock Exchange

AS THE American investment community spent the Thanksgiving Day holiday gobbling down copious amounts of turkey and pumpkin pie, dealers at home found that the London Stock Exchange was the dish of the day.

The shares touched 410½p before closing 12p higher at 405p amid revived gossip of an imminent £1.14bn, or 450p per share, cash offer from Germany's Deutsche Borse.

The rumours have been doing the rounds for months. But dealers heard that an LSE delegation led by chief executive Clara Furse and finance director Jonathan Howell was in Frankfurt yesterday talking turkey with Deutsche Borse chief executive Werner Seifert.

Although speculation intensified as the day wore on, the silence from the LSE's headquarters in St Paul's was deafening.

Seifert has been the driving force behind the Deutsche Borse since becoming chief executive in 1993. He has transformed it from one of the most backward stock exchanges in Europe to an international powerhouse.

He has already failed once in a bid to merge with London, but is now apparently hellbent on doing a deal and is prepared to pay a premium price.

Analyst Justin Bates, at Numis Securities, said: 'There must be a very good chance a deal will happen. Clara Furse has always said that her focus is on shareholder value.

'If the takeout price is 450p, that equates to 20 times earnings. Given the dynamics in play, without a bid the LSE shares would be trading a lot lower.'

The Footsie never looked back after getting an early lift from forecast-busting third-quarter figures from Tesco, 10¾p up at 308¾, and impressive first-half figures from United Utilities , 12p better at 559p. It closed 34 points up at the day's best of 4753.4.

Nervously sold recently on the Government's proposal to ban smoking in enclosed public places in the UK over the next few years, tobaccos regained some puff. Perennial takeover favourite Gallaher rose 25½p to 734p, Bats 23½p to 880½p and Imperial Tobacco 32p to 1369p.

New chief executive Stephen Hester's purchase of 31,750 shares at 785p helped British Land firm 19½p to 799½p.

Revived US bid rumours swelled turnover in office rental group Regus to almost 26m shares. The close was 2½p up at a year's peak of 86p.

Alternative Investment Market-quoted Cozart , which has devised an on-the-spot test to detect drug abuse - including heroin and crack cocaine - from a simple saliva sample, jumped 4p to 42½p. It has won a further extension to its contract with the Home Office for the use of its drug detecting system.

Pixology leapt 8p to 140p following the launch of a pilot scheme with Boots ,2½p easier at 628p, and Nokia that allows consumers to print photographs direct from their camera phone.

Workspace provider Bizspace held at 44½p despite news that top fund manager Peter Webb's Eaglet Investment Trust had bought a 3.52% stake in a £1.73m placing at 44p. Property entrepreneur Jack Petchey's investment vehicle Trefick owns 10.6% of Bizspace.

Vert-Eco gained &12frac;p to 12½p following the £7.4m reverse takeover of HydroDec Development Corporation. A placing of 9m shares at 11½p will raise £1m.

Placed on Aim at 50p by Noble & Company, shares of residential property mezzanine finance company Creon Corporation closed at 55½p, a 10% premium.

Honeygrove collapsed 3p to 7¾p after Oakdene Homes agreed a £9.36m all-share bid for the residential property company. RAB Capital ,1p off at 48&frac14p, holds 23% of Honeygrove and has accepted the offer.

Construction company Costain edged up ¼p to 42¼p after winning two significant Private Finance Initiatives contracts in the health and education sectors worth a combined £81m.

A positive trading update gave investment company Cobra Capital a 3p lift to 52½p. It plans to raise additional funds over the next few months to expand its portfolio.

ENTREPRENEUR chairman Iain Ross is rumoured to have found a deal at biotech group SR Pharma which should set pulses racing. The shares jumped 3p to 38½p on rumours of an imminent reverse takeover which will be earnings enhancing from day one. Ross knows the sector inside out, having worked at Hoffman LaRoche, Novartis and Celltech. He has been talking with potential partners for months.