Rival Vocalis jumped 13

Rival Vocalis jumped 13.5p to 110p after agreeing to supply Freeserve, up 17p to 198p, with its speech-based e-mail.Biotech tiddler Biocompatibles rose 8.5p to a yearly record of 128.5p on whispers of a major deal for its heart stents and vague talk of a bid. On a similar note whisky maker Highland Distillers toasted a 26.5p rise to 294p on talk of a bid to take it private. It also confirmed a joint venture with Remy Cointreau.The Israeli software group Pilat Technologies was the pick of the minnows. The AIM stock surged 12p to a best-ever 71.5p on talk of several large contract wins. United Utilities shed 56p to 740p, Scottish & Southern Energy dropped 15.5p to 540p, while Hyder blacked out 42p to 550p.In the midcap the buns-to-guns conglomerate Tomkins rifled 3p higher in good volume amid returning rumour of a 400p-per-share management buyout.

The next mooted takeover target is BRIT, flat at 103.5p after the chief executive bought a line of stock.Among drug companies, AstraZeneca shot 36p higher to 2,244p on talk that it wants to launch a cholesterol-busting drug by 2001.Electricity groups were left in the dark by the tough price review and missed out on the FTSE 100 rally. Rival Sun Life & Provincial jumped 22.5p to 452.75p after confirming the sale of GRE's life business to Aegon. Smaller rival CLM dropped 4p to 130.5p but after the close it confirmed that it is in talks over a 161p-per-share offer from rival Lloyd's group SVB, unchanged at 138.5p. The market believes that rumours of a joint venture with mutual Royal London Insurance could flush out a bidder such as Lloyds TSB, up 12p to 852.5p, or NatWest, 31p higher to 1152p. But the UK market really got going after the Dow rocketed higher on report of a possible merger between banking giant Merrill Lynch and rival Chase Manhattan or insurer American International Group.The undercard was once again lagging behind, with the FTSE 250 rising 35 to 5,960.1 and the Small Cap edging 9.3 higher to 2,719.2.The Merrill story reawakened bid talk in the UK financials Insurer Norwich Union firmed 13.5p higher to 415.5p. Inflation-positive news contained in the quaintly-named Beige Book published overnight by the US Federal Reserve triggered a positive start in London. Some traders whispered that its merger with Dutch peer Hoogovens could be scuppered by a rival bid before its October deadline.

Others suggested that BS could have a go at one of its Scandinavian rivals, long seen as sitting ducks.A third theory talked of a possible sale of BS's 51 per cent stake in Avesta, its Anglo-Scandinavian subsidiary, although analysts dismissed the idea.The sector takeover talk also buoyed Lonmin, the old Lonrho, which rose 15p to 625p.The rest of the FTSE 100 put in a steely performance, jumping 138.9 to 6,153.3. A wave of buying, particularly from US investors, sent BS 2.75p higher to a yearly peak of 179p in heavy volume amid a raft of rumours. The struggling Belgian group Union Miniere was mooted as a target. As for Anglo, dealers speculated that if it missed out on Billiton it could go for the Australian rival North.The heavy metal excitement spilled over to British Steel. Anglo is big in gold but would love to expand in other base metals such as aluminium, which is one of Billiton's strong points.With two mega-mergers among some of the world's leading largest aluminium producers announced over the past two days, the field of potential targets is shrinking and Anglo could be prompted to pounce soon.However, its ambitions could be thwarted by Rio Tinto, up 61p to a record 1284.5p, another acquisition-hungry mining giantThe bid fever overshadowed a bullish Morgan Stanley note, which put a 380p price on Billiton .A few sceptics argued that a takeover by either Anglo or Rio could create competition problems and suggested that Billiton could hit the acquisition trail itself.

The normally-quiet stock dominated the session, digging a near 13 per cent rise in high volume as big brokers told clients not to be short of the shares. The South African group closed 34.5p higher to an all-time high of 302.75p - by far the best performer in a soaring FTSE 100.The many supporters of the Billiton takeover talk said that fellow South African company Anglo American, up 173p to a record 3,771p, was the likeliest suitor. BILLITON WAS the market's glittering prize yesterday amid talk that the metals group could be the next victim of the consolidation wave sweeping the sector. Turnover was pounds 26.4m, up from pounds 22.7m.Tim Thwaites, the chairman, who is to retire this year, said: "I believe this year has demonstrated the strength of the Slug and Lettuce concept. "Despite a slow start, the business recovered well and has gone on to produce the highest returns the group has ever recorded."Its northern bars in Leeds, Nottingham, Manchester, York and Harrogate had done particularly well, pulling into the black in the second half, helped by a late licence at the Manchester site.The group's first venture into Scotland saw success in Glasgow, and plans are in preparation for expansion in Scotland.Food saw an overhaul, with shorter menus and brunch and snacks piloted, helping sales in the area rise by 53 per cent.The company said this year had begun well, with comparable sales up by 10.4 per cent in June and July.The group will maintain its final dividend of 3.35p, making a total dividend of 6.375p.. It is now setting stringent criteria for new bars and plans to open four or five this year, mainly in the South, with some in the North, Scotland and Wales.But the group, which operates 30 Slug and Lettuce pubs, said overall the year had been a record, with excellent second-half trading.This helped to push pre-tax profits in the year to 31 May to pounds 2m, up from pounds 757,000 in the previous period.