Germans Set to Barge in on Alliance Boots

THE German owner of the Lloyds Pharmacy chain is threatening to spoil the p arty

at Alliance Boots, up 312p at 1030p, by topping the 1040p-a- share offer on the table from Kohlberg Kravis Roberts and the company’s deputy chairman Stefano Pessina.

Celesio, the rival drugs wholesaling and distribution company, is reported to be putting together its own consortium and has appointed NM Rothschild as a financial adviser. KKR last week raised its offer for Alliance Boots and has now been given access to the books.

Celesio tried to block last year’s Pounds 7 billion merger of Boots and Alliance UniChem. Dresdner Kleinwort says any bid by Celesio is likely to greeted by regulatory problems. The broker says the acquisition of Alliance Boots would give Celesio 70% of the French and UK drugs distribution market.

Meanwhile, the rest of the market frittered away an early lead, with the FTSE 100 index losing 8.1 at 6299.9. It was undermined by opening falls on Wall Street this afternoon that saw the Dow fall 13 points to 12,341.30.

Credit rating agency Experian showed most other blue-chips a clean pair of heels as the price rose 1112p to 597p. Dealers say the speculators have read across from KKR’s proposed $25 billion bid for First Data Corp, which processes credit-card payments.

It has taken a long time, but Compass Group, up 812p at 34812p, is showing signs of revival. The shares have performed strongly in the wake of last week’s better-than-expected first-half trading update, which has prompted brokers to begin upgrading their profit numbers.

BT Group rose 534p to 30912p as fund managers began switching out of Vodafone following last week’s warning on margins. But Vodafone rallied 1.1p to 136.6p after Dresdner Kleinwort repeated its buy rating following a meeting with the company. Only last week, the mobile phone giant’s boss Arun Sarin told the City that margins in the UK and Germany had come under pressure from increased competition.

BT was also underpinned by the news that Pirelli is in talks to sell two-thirds of its controlling shareholding in Telecom Italia to ATT in the US and Mexican mobile phone operator America Movil for e2.82 a share. The Pirelli stake is held by its Olimpia unit, which controls Telecom Italia via an 18% holding.

Cable Wireless also rose 3.7p to 170.3p.

Credit Suisse is sticking with its outperform rating on Carphone Warehouse, off 234p at 274p, following the retailer’s thinly veiled profits warning..

Carphone’s unscheduled trading statement said full-year results for the year just ended would be in line with expectations.

But it warned that increasing costs associated with broadband customer service, as well as incremental investment in joint venture start-up costs, will hurt pre-tax profits for the current year to 31 March 2008 by between Pounds 20 million and Pounds 30 million.

Credit Suisse said this was likely to drop consensus pre-tax forecasts from Pounds 250 million to between Pounds 220 million and Pounds 230 million, with a 4% to 5% impact onmedium-term forecasts, as it expects some of the costs to reverse.

British Land, up 16p at 1544p, and Land Securities, 21p better at 2161p, have been upgraded byHSBC following a review of the European property sector, but rival Slough Estates, steady at 784p, has been downgraded. HSBC says British Land has been oversold and raises it from neutral to overweight and its target from 1682p to 1730p.

Land Secs has been upgraded from underweight to neutral with a target price up from 2201p to 2240p, having already fallen by 10% this year. Slough was cut from overweight to neutral, with an unchanged target of 840p, the company having enjoyed strong support recently.

HSBC remains underweight in Liberty International, 3p firmer at 1250p, with an unchanged target of 1170p, along with Hammerson, where the target is raised from 1383p to 1500p..

TRADERTALK THE Hansa Trust has taken a large shareholding in recruitment services company Work Group. The trust, which is run out of Hansa Capital Partners by John Alexander, owns 1.4 million shares, a 5.49% stake in the Pounds 20.5 million company. The news comes on the back of strong trading at Work Group.

It recently reported a jump in annual earnings to Pounds 2.4 million from Pounds 1.1 million the previous year. It attributed the sharp increase in profits to positive contributions from its acquisitions and a growth in income generated from fees. Work Group accompanied the numbers with a maiden dividend of 0.4p.

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