Dealers pack travel stocks in portfolio

 

GOSSIP about a £2.5bn summer travel agency merger got dealers hot under the collar. MyTravel climbed to 242½p before closing 8p higher at 238p.

Speculation is growing that bigger tour operator First Choice Holidays, 1p better at 215p, is lining up a bid for the former Airtours group which, ironically, once launched an unsuccessful bid for First Choice before flirting with bankruptcy.

The holiday was certainly almost over for MyTravel in 2002 when it nearly collapsed under the weight of massive debts, which at one time amounted to a mammoth £800m. It subsequently underwent a life-saving £1.3bn refinancing which involved a debt-for-equity swap.

Recovery from the excesses of four years ago has been a slow and painful process but the company is now forecasting sunnier times ahead. At the agm in March it said it was on target to report an operating profit in all three divisions this year.

This was despite a £16m rise in fuel costs for the winter and the impact of Hurricane Wilma on its North American operations. Shareholders could even get a dividend - but not until December next year.

First Choice, which has been retreating from the European short-haul charter holiday market and expanding into the more upmarket long-haul business, has already bolted on acquisitions totalling £110m this year.

It is still targeting other niche travel businesses in Europe and the US but a purchase of MyTravel would be the quantum leap.

Dealers were braced for another depressing session when the Footsie opened 60 points lower - in sympathy with Wall Street's overnight fall of 184 points.

But much to everyone's surprise, buyers piled in, prompting a strong rally. It traded 91.8 points higher before closing 71.8 points up at 5723.8. Wall Street recovered 78 points in the early stages.

Barclays featured with a 28½p jump to 618p on hefty turnover of 66m. Punters sprang into action amid revived rumours of a £45bn or 700p-a-share cash offer from US banking giant Citigroup.

News that US power firm NRG had rejected a £4.3bn offer from Atlantabased Mirant excited the uilities.

Speculation that NRG could now seek a defensive merger with International Power to stave off Mirant's advances helped the UK operator of 40 power stations spark 14¾p higher to 289¾p.

International Power has been deemed vulnerable since it abandoned plans to bid £2bn for coal-fired power station Drax in November.

It has often been mentioned in the same breath as Germany's E.ON but any utility giant would like to get its hands on IP's portfolio of power stations which have been benefiting from high electricity prices.

Social housing group Mears lost a further 4¼p to 257¾p, but broker Altium Securities says the fall over the past three months has been overdone. Next week's agm should be bullish. Shareholders can look forward to hearing that the burgeoning order book is £1bn-plus and rising.

Investment bank Evolution Group firmed 4p to 157p on hopes it will this week tie up the acquisition of stockbroker Williams de Broe.

Z Group, the internet technology company, rose 8p to 120p after announcing a 78% leap in pretax profits to £1.1m on turnover 53% higher at £5m. It has £4.1m cash in the bank.

Placed on Aim at 15p by broker Corporate Synergy, shares of Essentially Group closed at 18p.

The company acquired Global Sports Management for £4.3m, a company whose clients include All Blacks rugby ace Dan Carter and England and British Lions forward and part-time crooner Matt Stevens. It also advises formula 1 driver Jenson Button.

• PENNY-STOCK followers should take a closer look at Titan Move, 0.06p easier at

1.12p. The acquisitive caravan and leisure group has appointed Simon Dixon to the board. This brings together the team that built Dixon Motors into the third-largest car dealer with a turnover of £800m-plus. It was eventually sold to Royal Bank of Scotland for £118m in 2002. From little acorns?

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