/raid1/www/Hosts/bankrupt/TCREUR_Public/000508.mbx     T R O U B L E D   C O M P A N Y   R E P O R T E R     

                       E U R O P E

         Monday, May 8, 2000, Vol. 1, No.1

                       Headlines

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F R A N C E
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AIR LIBERTE: BA To Sell Unprofitable French Domestic Unit
LAFARGE:  Faces Further Loss
MICHELIN: To Cut 1,880 Jobs as Part of Reorganisation
PROVIDENT: To Make 4.5 Billion Stg Conversion
UGC: French Gov't. Declared Mktg. Strategy as Illegal


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G E R M A N Y
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BAYERISCHE MOTOREN: May Face Double Cost If It Shuts Rover
DEUTSCHE BANK: Gevaert NV Has Initiated a Legal Claim
TELEGATE AG: Acquired By Seat Pagine Gaille


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I T A L Y
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BANCO DIDESIO: Rating Downgraded
DUCATI MOTOR: Approves 100 Mln. Euro for Debt Refinancing
FILA HOLDINGS: First Quarter Net Loss Was U.S. $3.5 million


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N E T H E R L A N D S
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BAAN COMPANY: Extends Fall As Financial Worries Mount


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S W E D E N
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TELIA:  Privitization to be Set Over the Weekend of May 20-21


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U N I T E D   K I N G D O M
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ALLIED DOMECQ: Cactus Disease Could Cost Company ?10m
BLUE CIRCLE: Facing a Bill of More Than 20 Million Pounds
BOO.COM: Want to Sell company After Plans for IPO Were Abandoned
BRITISH TELECOM: Shares 6% on Romours of Profits Shortfall
ROYAL & SUN: Investors Worried About Its Ability to Cut Costs
WATERFALL HOLDINGS: Receives ?22.7m Bid from Allied Leisure
WHITBREAD PLC: Investors Left Unimpressed, Shares Slipped Back


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F R A N C E
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AIR LIBERTE: BA To Sell Unprofitable French Domestic Unit
-------------------------------------------
Reuters   May 4, 2000

British Airways is poised to sell its unprofitable French domestic unit Air
Liberte to a French investment group, with an announcement expected as early
as Friday, industry sources said.

BA has been in exclusive negotiations with Taitbout Antibes BV since April
over the sale, which is expected to generate some 50 million pounds and will
allow Europe's largest carrier to exit one of its most unsuccessful foreign
ventures.

Air Liberte's board met on Thursday afternoon to finalise the details of the
sale -- which involves BA selling its 86 percent holding in Air Liberte's
parent company -- and the sources said a deal could be wrapped up in late
evening.

Dropping Air Liberte is likely to come as a relief to investors who -- braced
for BA to announce a whopping full-year loss later this month -- want proof
that BA is serious about focusing on the profitable parts of its business.
BA bought Air Liberte out of administration in 1997 and merged it with an
equally unsuccessful acquired operation -- TAT European Airlines -- with a 60
million pound investment.

The carrier, which operates 24 planes, lost some 60 million pounds in the two
years to March 1999, after fierce competition from Air France on several
domestic routes. BA has also faced strikes among Air Liberte's 2,800
employees.


LAFARGE:  Faces Further Loss
----------------------------
UK Yahoo Finance   May 5, 2000

Lafarge faces a further loss when it fulfils its obligation to buy the 9.6
percent acquired by its advisers Dresdner Kleinwort Benson. Lafarge's total
outlay could be as high as 350 million pounds.


MICHELIN: To Cut 1,880 Jobs as Part of Reorganisation
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Reuters   May 4, 2000

French tyremaker Michelin said on Thursday that it planned to cut 1,880 of
the 28,700 jobs at its four French sites over three years as part of a
reorganisation to enable it to face fierce competition in Europe, its main
market. The company said that it needed to specialise operations at the four
sites - at Toul, Troyes, Clerment-Ferrand and Joue-les-Tours - to optimise
use of machinery and production flow.


PROVIDENT: To Make 4.5 Billion Stg Conversion
---------------------------------------------
UK Yahoo Finance   May 5, 2000

In a move that could net 1,000 stg for each of its 1.5 million members and
catapult it onto the FTSE 100, Friends Provident [FP.CN] is set to
demutualise and list on the Stock Exchange in a 4.5 billion pounds float.


UGC: French Gov't. Declared Mktg. Strategy as Illegal
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Financial Times   May 4, 2000

UGC, France's biggest cinema chain, has scrapped a controversial marketing
strategy after the French government asked competition regulators to declare
the scheme illegal.

The company said on Thursday it was "suspending" sales of a popular
subscription scheme giving unlimited access to cinemas, pending a ruling by
the Conseil de la Concurrence, the independent competition watchdog. The move
follows last week's decision by Catherine Tasca, culture minister, to refer
the issue to the regulator after owners of small cinemas complained that the
scheme was an abuse of UGC's dominant position.

UGC's card offers its holders unlimited access to all the group's cinemas in
France for a fixed fee of FFr98 (E15, $14) a month. This compares with an
average price of FFr50 for cinema tickets, or FFr33 if discounts are taken
into account.

The scheme came under attack from associations representing film producers,
as well as from independent operators of smaller cinemas. Both groups claimed
that UGC's card would damage the French film industry by attracting viewers
away from the art films typically shown in small cinemas.

Producers also expressed fears that the discount would result in smaller
subsidies to film makers. French films, usually made with smaller budgets
than their US competitors, are subsidised by way of a levy on every cinema
ticket sold. UGC said it would continue to calculate the levy by applying an
average price of FFr33, even if users of its card paid less.

Legal experts believe UGC's initiative could contravene French competition
law, which prohibits the abuse of a dominant position. UGC is considered
dominant in some cities, where it controls more than 50 per cent of cinemas.
Cinema experts also fear that the scheme, which was well on its way to
beating its break-even target of 100,000 cards, might force UGC's competitors
- the Gaumont and Path, groups - to adopt similar practices. In an attempt to
calm the opposition, UGC on Thursday offered to discuss with independent
movie houses the possibility of allowing its cards to be used in other
cinemas. The ruling is expected at the end of next month.


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G E R M A N Y
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BAYERISCHE MOTOREN: May Face Double Cost If It Shuts Rover
----------------------------------------------------------
Daily Telegraph   May 5, 2000

BMW faces a ?1.6 billion bill if it closes Rover at the end of the month -
double what it would have to pay if it sells the ailing former British
flagship, it emerged yesterday.

Insiders claim the German company has underestimated the cost of closing
Longbridge, which employs about 8,500 workers. This cost is expected to
include over ?100m in compensation claims from trade unions for unfair
dismissal and failure to consult workers under UK rules on the transfer of
undertakings and protection of employment (TUPE).

The company will also have to face "a fortune" in terms of redundancy
packages, guaranteeing ?1 billion-worth of dealer financing and extricating
itself from its overseas dealerships, some of which are wholly owned and some
independent. A BMW spokesman declined to comment on the potential cost of
closure versus selling Rover.

Meanwhile, the Phoenix consortium of West Midlands businessmen spent its
third day preparing a business plan to take over Rover, amid calls from
thwarted Rover buyer, Alchemy, that Phoenix's takeover plans were only being
kept alive for political reasons.

Eric Walters, a partner at Alchemy said: "Today being election day, BMW being
more sensitive to the British political scene and the Phoenix consortium
being more political than real, it will be interesting to see what happens in
the next few days." He said that Alchemy's "door was open" if BMW wanted to
return to the venture capitalist's original bid to turn Rover into a mid-
volume sportscar maker.


DEUTSCHE BANK: Gevaert NV Has Initiated a Legal Claim for DM323M in Damages
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HANDELSBLATT ENGLISH SUMMARY, Friday, 5 May 2000

Belgian investment group Gevaert NV has initiated a legal claim for DM323m in
damages from Deutsche Bank AG. The damages arise from Gevaert's investment in
ailing construction group Philipp Holzmann AG, in which Deutsche is a major
shareholder. From Holzmann itself, Gevaert is claiming a relatively modest
DM75bn euros. Gevaert said its claim against Deutsche could be raised by a
further DM80m. Andr, Leysen, chairman of Gevaert's administrative board, has
said in the past that the group lays most of the blame for losses incurred in
connection with Holzmann on Deutsche Bank.


TELEGATE AG: Acquired By Seat Pagine Gaille
-------------------------------------------
Financial Times    May 4, 2000

Seat Pagine Gialle, the Italian "yellow pages" telephone directory company,
on Thursday acquired Telegate, the German telephone service company and one
of the country's leading voice portals, for about E1.9bn ($1.7bn).

It is the second European acquisition this week for Seat, which is in the
process of absorbing Telecom Italia's Tin.it internet activities to create
one of Europe's largest internet service companies. Earlier this week it
increased its 46.3 per cent stake in Euredit, a French business-to-business
portal, to 85 per cent in a E35m deal.

Lorenzo Pellicioli, Seat chief executive who will also be chief executive of
the new Seat-Tin.it group, said Telegate would expand his company's
activities in Europe and the US.

He said Seat, which will be capitalised at about E50bn when the Tin.it merger
is completed next month, intended to use its highly rated shares to continue
to grow.

"We intend to enrich our offer to consumers in Italy at the same time as
enriching our business-to-business services to European customers through
continuing acquisitions," he said.

The acquisition of Telegate, which is quoted on Germany's Neuer Markt and has
a market capitalisation of about E1.9bn, will be in two stages.

Through an issue of new shares, Seat is offering E150 a share for Telegate, a
4.2 per cent premium on Wednesday's closing price and an 11 per cent premium
on the average price over the past three months. The share exchange will be
based on a ratio of 30.86 Seat shares for every Telegate share.

The first phase of the transaction will see Seat acquire a 51.4 per cent
stake in Telegate Holding, a non-listed company that controls 51 per cent of
the German telephone services company.

Seat is acquiring this stake from Ligapart, a subsidiary of the German Metro
retailing group, which is selling its 49.8 per cent stake in Telegate
Holding.

RSLCom, a Nasdaq-listed US company founded by the son of Est,e Lauder, the
cosmetics entrepreneur, is selling a further 1.6 per cent stake to Seat.
Seat will subsequently launch a public share exchange offer for all
outstanding Telegate shares.

At the same time, Seat and RSLCom will form a joint venture to develop
internet and data services in Europe and the US. Seat also has an option to
buy RSLCom's stake in the venture.

Telegate's existing management, led by Klaus Harisch, chief executive, has
agreed to hold its 16 per cent stake in the company at this stage and not to
leave the company for at least three years.

J.P. Morgan advised the Italian company in the Telegate acquisition. The
German group was advised by Morgan Stanley.


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I T A L Y
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BANCO DIDESIO: Rating Downgraded
--------------------------------
Fitch IBCA  May 3, 2000

Fitch IBCA-London-3 May 2000: Fitch IBCA has downgraded Banco di Desio e
della Brianza's (BD) Long-term ratings to 'BBB+' from 'A-' (A minus). The
Short-term, Individual and Support ratings of respectively 'F2', 'B/C' and
'5' are affirmed.

The rating action reflects the agency's concern over BD's medium- to long-
term prospects within an increasingly difficult operating environment.

With equity of c. EUR 208 mln at end-1999, BD is a small, local, private bank
operating in the wealthy region of Lombardy (mainly in the province of
Milan). The bank, whose key competitive advantages are its deep knowledge of
its market and its good local reputation, offers traditional corporate and
retail banking services to a client base made up of households and small and
medium-size enterprises. In recent years, it has experienced tougher
competition as new entrants have opened branches in the areas where it
operates.

Although BD has moved towards aligning its pricing (on lending and deposits)
with that of competitors, its stable and loyal client base has enabled it to
continue to sell its services at a premium.

This is reflected in its relatively high net interest margin of 3.6% for
1999. In coming years, the agency considers that competition will intensify
(including the possible presence of aggressive internet rivals), and that
unless BD gains more distinctive competitive advantages, it will find it
increasingly hard to maintain a good level of net interest income.

The bank has been successful at raising net commission income principally
from asset management activities but the growth of the sector in Italy is
forecast to slow down.

Meanwhile, the bank's cost base (due to its small size) is still relatively
high. As a result of the above influences, Fitch IBCA believes that the
bank's operating profitability, while satisfactory at present, is likely to
come under pressure.

BD's credit and market risks are limited. Its loan portfolio is adequately
diversified and its asset quality good: at 1.57% of total lending at end-
1999, the level of doubtful loans compares favourably to that of other
Italian banks. The bank is also comfortably capitalised with a Tier 1 ratio
of 12.03%.
DUCATI MOTOR: Approves 100 Mln. Euro Bond Issuance for Debt Refinancing
-------------------------------------------
BOLOGNA, Italy, May 5 /PRNewswire/ -- Ducati Motor Holding S.p.A. (NYSE: DMH,
Milan's Telematico: DMH), a leading manufacturer of high performance
motorcycles, today announced that the Board of Directors approved a Euro bond
issue of 100 million Euros. The tenor of the bonds will be 5 years with
repayment at maturity. The pricing and the coupon will be determined at a
later date. The bonds be offered only to institutional investors in Italy and
outside of Italy, with the exclusion of the U.S., and will be listed on the
Luxembourg Stock Exchange.

Credit Suisse First Boston and Mediobanca -- Banca di Credito Finanziario
S.p.A. have been nominated lead managers for this deal.
The Company intends to use the proceeds for debt refinancing.

This announcement is neither an offer to sell nor a solicitation of an offer
to buy the bonds. There is no assurance that the bond offering will be
completed.

Founded in 1926, Ducati builds racing-inspired motorcycles characterized by
unique engine features, innovative design, advanced engineering and overall
technical excellence. Ducati has won eight of the last ten World Superbike
Championship titles and more individual victories than the competition put
together. The Company produces motorcycles in four market segments which vary
in their technical and design features and intended customers: Superbike,
Supersport, Monster and SportTouring. The company's motorcycles are sold in
more than 40 countries worldwide, with a primary focus in the Western
European and North American markets.


FILA HOLDINGS: First Quarter Net Loss Was U.S. $3.5 million
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BIELLA, Italy--(BUSINESS WIRE)--May 4, 2000--Fila(a) Holding S.p.A.
(NYSE:FLH) today reported its unaudited results for the first quarter ended
March 31, 2000.

In U.S. dollars, first quarter net loss was U.S. $3.5 million, or U.S. $0.13
per ADS, compared with a net loss of U.S. $8.7 million or U.S. $0.32 per ADS
in the first quarter of 1999.

The Italian lira depreciated by 14 percent against the U.S. dollar on a
quarterly average basis; the average exchange rate was U.S. $1 = Lit.1,962 in
the first quarter of 2000 and U.S. $1 = Lit.1,723 in the corresponding
quarter of 1999.

In Italian lire, worldwide revenues for the first quarter were Lit.506.5
billion, up eight percent from Lit.468.5 billion in the corresponding period
of 1999. Net loss for the quarter was Lit.6.9 billion compared with net loss
of Lit.14.9 billion in the first quarter of 1999.

Total backlog of customer orders(b) as of March 31, 2000, scheduled for
delivery from April 2000 through September 2000, increased by nine percent
(in Italian lire) compared with the corresponding period in 1999. In
particular, apparel increased by 13 percent and footwear increased by four
percent. U.S. backlog increased by 13 percent (in U.S. dollars), with apparel
up by 46 percent and footwear down by 11 percent. Outside the U.S. and
excluding the markets where Fila sells its products on a delivery basis (such
as Korea), backlog increased by eight percent (in Italian lire), with apparel
up by one percent and footwear up by six percent over the previous
corresponding period.

Net direct sales in the first quarter of 2000 totaled Lit.494.4 billion, up
by eight percent from Lit.457.0 billion in the corresponding period of 1999.
Apparel sales were Lit.242.1 billion, up by 23 percent from Lit.196.4 billion
in the first quarter of 1999, while footwear sales decreased by three percent
to Lit.252.3 billion, compared with Lit.260.6 billion in 1999. In particular,
sales in Europe increased by one percent to Lit.257.5 billion, with apparel
up by 10 percent to Lit.123.8 billion and footwear down by seven percent to
Lit.133.7 billion. Sales in the U.S. were Lit.108.6 billion in the quarter,
increasing by one percent from Lit.107.2 billion; U.S. apparel totaled
Lit.46.8 billion, up by 16 percent, and footwear Lit.61.8 billion, down by
eight percent. Sales in the Rest of the World increased by 37 percent, with
apparel up by 65 percent and footwear up by 12 percent.
Michele Scannavini, chief executive officer of Fila, said:

"This quarter indicates that Fila is back on the growth cycle. Our revenues
are up by eight percent, but most remarkably our future orders are up in all
geographic areas, with increases both in apparel and footwear. We are
particularly pleased with the progress in the USA where, after many difficult
seasons, it looks like the brand is starting to regain credibility and
interest of both the trade and consumers. Worth noting also the excellent
performance in Asia Pacific where Fila's rate of growth is very strong,
mostly in Korea and Australia."

In the first quarter of 2000, gross profit was Lit.206.8 billion compared
with Lit.183.7 billion in the corresponding 1999 period; gross margin
(calculated on total net revenues) increased to 40.8 percent from 39.2
percent as a result of the progress achieved through greater operating
efficiency as well as of higher royalty income.

Selling, general and administrative expenses increased by 11% to Lit.194.7
billion for the first quarter, compared with Lit.176.2 in the previous
corresponding period, increasing as a percentage of sales to 38.4% from
37.6%. The increase is almost completely due to exchange rates effects;
holding exchange rates constant, the increase would be only Lit.3 billion. It
is important to note that the mix of our expenses is changing in favor of
Advertising and Promotion whereas other fixed expenses are declining as a
percentage of total turnover.

As a consequence of the above mentioned factors, income from operations in
the quarter was Lit.12.1 billion compared with Lit.7.5 billion in the same
quarter of 1999.

Other income and expenses were Lit.16.3 billion in the first quarter of 2000
compared with Lit.17.1 for the corresponding quarter of 1999. The greater
interest expenses, due to the higher interest rates and financial position,
have been more than offset by exchange rates differences.

Income taxes were Lit.2.8 billion compared with Lit.5.4 billion in the
corresponding quarter of 1999.

Net financial indebtedness as of March 31, 2000 was Lit.687.1 billion
compared with Lit.555.8 billion as of March 31, 1999; on a constant exchange
basis the net financial indebtedness would be Lit.644 billion.

Fila Holding S.p.A., headquartered in Biella (Italy), is a leading designer
and marketer of athletic and casual footwear and of activewear, casualwear,
and sportswear. Fila has created strong brand recognition by marketing
products with a high design and style content and by securing professional
athletic endorsements.


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N E T H E R L A N D S
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BAAN COMPANY: Extends Fall As Financial Worries Mount
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Reuters   May 4, 2000

Baan Company shares extended losses on Thursday as the loss-making Dutch
business software company failed to reassure investors on its financial
situation.

The stock, which fell as much as 33.6 percent on Wednesday, had lost a
further 14 percent to 2.28 euros by 1040 GMT.

Earlier the shares were suspended from trading for about 15 minutes, pending
a statement from Baan saying its agreement with Bear Stearns for a 150
million euro ($133 million) cash injection could continue regardless of the
share price falling below an agreed upon level.

On the down side, Delta Lloyd Bank analyst Marco Schram said Baan's statement
showed it was not in control of the situation because Bear Stearns can decide
on a case-by-case basis whether to inject cash.

Nevertheless, he added: "Bear Stearns should be very informed on Baan at the
moment and they are still buying shares, so that is a positive side." The
market had speculated a fall in Baan's share price to below three euros would
endanger the capital investment agreement Baan sealed in March with Bear
Stearns. Baan refused to confirm or deny that the level was set at three
euros.

"Today's news is better than yesterday's speculation that Baan would be cut
off," said Jeroen van Harten, an Rabo Securities. "If Bear Stearns had waived
the 3-euro per share restriction completely then that would have been more
reassuring."

On Wednesday, Baan shares fell through the three euro barrier for the first
time, and hit a low of two euros, a drop of 33.6 percent, in heavy early
trading.

Financial Times   May 4, 2000

Baan, the ailing Dutch software group, on Thursday admitted that its
collapsing share price could rob it of the time it says it needs to solve its
financial crisis.

Every effort to shore up investor confidence has so far failed to arrest the
crashing decline of its share valuation.

On Thursday it gave assurances that its funding line to Bear Stearns, of the
US, was secure.

Its shares shed a further 12 per cent in Amsterdam to a new low of E2.33.

In a short statement it said Bear Stearns had exercised one "put" under a
deal that allows Baan to put its shares to the investment bank as often as
every three trading days, in return for funding totalling E150m ($133.7m)
across a period of 18 months.

Bear Stearns had waived a condition of that agreement tying funding to a
minimum share price - thought to be E3 - and would address future puts on a
case-by-case basis, the statement said.

In a later interview, Baan refused to disclose the size of Bear Stearns' cash
injection.

It maintained its arrangement with another cash lifeline was also secure.
Fletcher International, a US investment fund, has poured in $210m.
Baan has posted seven successive quarterly losses and has seen its chief
executive and finance director resign.

Last month Robert Ruijter, chief financial officer, said it would need at
least two fiscal quarters to show evidence of a recovery and envisaged
breaking even within a year.

But yesterday a spokesman for the company said he had been flooded by calls
from concerned investors. Clients too were worried, he said. "Fixing these
things takes as long as it takes. These are complex issues that cannot be
done in a couple of days.

"But the clock is still ticking. The pressure here is enormous."


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S W E D E N
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TELIA:  Privitization to be Set Over the Weekend of May 20-21
-------------------------------------------------------------
Reuters   May 3, 2000

Sweden said on Wednesday the price range for the first tranche of its long-
awaited privatisation of telecoms operator Telia [TELI.CN] would be set over
the weekend of May 20-21.

Arne Berggren, spokesman for the Industry Department which is coordinating
the sale, told a news briefing priority would be given to the Swedish public
in the sale. The public subscription period would be May 25-June 8, he said.

The size of the first tranche, which was originally expected to be between 25
and 30 percent of the company, would depend on market conditions and demand
for the offer, he said.

Telia, the former state telecoms monopoly, has been valued at up to 400
billion crowns ($44.47 billion), but the recent correction in telecoms share
prices would probably mean a lower valuation at present.

The state has said it would use some of the proceeds from the Telia sale for
an 8.3 billion crown investment in public broadband datacommunications
infrastructure.


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U N I T E D   K I N G D O M
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ALLIED DOMECQ: Cactus Disease Could Cost Company ?10m
-----------------------------------------------------
The Times   May 5, 2000

ALLIED DOMECQ, Britain's second-largest spirits group, faces costs of up to
?10 million as a result of a rare disease that is killing the agave cactus,
the main ingredient of tequila, one of the company's leading products.

Phillip Bowman, chief executive, said that the problems had cost about ?3
million in the first half of the year and were likely to rise to more than ?8
million by 2001. He added that primitive agricultural systems in Mexico were
exacerbating the problem and that volumes of its leading Sauza Tequila brand
would be affected for up to three years.

Allied Domecq unveiled profits for the first six months of the year up 16 per
cent at ?210 million on turnover of ?1.28 billion. The company, which owns
Beefeater Gin and Ballantine's whisky, is to focus on the overseas market,
which already accounts for more than 90 per cent of sales. Allied has
targeted Asia and Eastern Europe.

Mr Bowman is also looking for an international vodka brand to add to Allied's
drinks portfolio.

Allied is keen to add a hot food arm to its triumvirate of takeaway
businesses in the US. Allied owns Dunkin Donuts, Togo, a sandwich shop, and
Baskin Robbins, the ice-cream chain. Mr Bowman also hopes to quit ice-cream
production to concentrate on food franchising.

Allied will pay an interim dividend of 4p. Last year's 15p included an 11p
special dividend paid out of disposal proceeds. The shares rose 10p to 328p.


BLUE CIRCLE: Facing a Bill of More Than 20 Million Pounds
---------------------------------------------------------
UK Yahoo Finance    May 5, 2000

Blue Circle is facing a bill of more than 20 million pounds for its
successful bid defence against Lafarge's hostile takeover attempt. The bill
is expected to be somewhere between 20 million pounds and 25 million pounds,
much of it payable in the form of success fees to its advisers.

Lafarge also came out of the bidding war a little worse for wear. The
revolving credit facility it arranged to fund the offer will cost it about 50
million pounds, and the company also has an unrealised loss of about 60
million pounds as a result of the 20 percent stake it bought in Blue Circle.


BOO.COM: Want to Sell company After Plans for IPO Were Abandoned
----------------------------------------------------------------
The Economist    May 6 to 12, 2000

Shareholders in boo.com, a privately held Internet sports-goods retailer,
want to sell the company after plans for an IPO were abandoned in the wake of
declining investor interest in dot.com shares and poor sales performance.
Boo.com could now be a target for a retailer or sports-goods manufacturer.
Bertelsmann, Europe's biggest media company, likewise abandoned plans to
float bol.com, its online bookshop, citing "unfavourable market conditions".



BRITISH TELECOM: Shares 6% on Romours of Profits Shortfall
----------------------------------------------------------
The Street    May 4, 2000

British Telecom shares were down 6% to ?10.55 in mid-afternoon trading amid
rumours that it has been talking down its profit forecasts.

A spokesperson from BT denied it had been in such contact with analysts but
the talk spread across trading floors, knocking millions off the market
capitalisation.

The drop was an extension of yesterday's fall, which was due to negative
market sentiment in the wake of AT&T's lukewarm trading statement. Also, BT
has a joint venture, Concert, with AT&T in the US.

"BT already warned us in its last trading statement that sales from its
Concert venture would not be strong. The poor results from AT&T had a
negative impact on BT as analysts started to ponder how this would impact
BT's profits," said one US banker.

BT estimated on 5 January that Concert would generate $7 billion revenues,
compared with total revenues for BT of ?18 billion last year.

Some analysts remain bullish on BT. Martin Mabbutt at Warburg Dillon Read has
a 'strong buy' rating on the group, regardless of fears about contagion from
AT&T.

"The Concert venture with AT&T gives it a powerful ally through which to
access US corporate customers and a cost effective platform upon which to
build a US business," he said.

"Its recent restructuring should enable a more focused approach to
capitalising on growth opportunities, particularly in Europe. Flotations of
certain key divisions have been signaled, enabling a better appreciation of
value."

The slump in the shares comes the same day as competitor NTL launches its
digital platform which offers voice, televison and Internet services for ?13
per month, in direct competition to BT.

Also, BT's dive coincides with a general fall in the European telecom sector
following AT&T's results.


ROYAL & SUN: Investors Worried About Its Ability to Cut Costs
-------------------------------------------------------------
Reuters  May 4, 2000

Royal & Sun Alliance Insurance Group Plc's shares fell almost five percent on
Thursday after the British group reported a 4.8 percent fall in first quarter
profits, near the lower end of market expectations.

Royal & Sun said progress in turning around its underperforming UK general
insurance book had been slower than some analysts had expected, but it was on
track to meet its underwriting and capital return targets next year.

The insurer also said its major U.S. acquisition last year of Orion Capital
was performing better than expected, with cost savings likely to be double
initial expectations.

Royal and Sun Alliance's share price closed down 16.5 pence or 4.6 percent at
339.5 pence, having earlier fallen more than seven percent to a low of 331
pence.

Its group operating profit fell to 138 million pounds ($215.6 million) from
145 million pounds the previous year, despite a 20 percent increase in
worldwide general insurance premium to 2.1 billion pounds. The higher
premiums were due largely to two big acquisitions.

Analysts had forecast a pre-tax operating profit of between 134 and 160
million pounds, so the result was near the bottom of expectations. Analysts
said the results were disappointing.

"There are lot of bears out there on Royal & Sun and a lot of people need
convincing, and these results are not convincing," said HSBC's David Hudson.
Royal & Sun Alliance shares have fallen from over 600 pence to a low of 296
pence in the last year and have underperformed insurance stocks by over five
percent in the last six months.

Analysts and investors are worried about Royal & Sun Alliance's ability to
cut costs and compete in a sector hit by heavy competition and low
profitability. It is often touted as a potential takeover target and is
trading at less than its net asset value when others trade well above net
assets.

It also trades at a significant discount to its peers in terms of multiples
to earnings.

VOLUMES SACRIFICED TO BOOST UK RATES

In the tough British market, Royal and Sun Alliance said premiums had fallen
seven percent as it sacrificed volumes to ensure higher premiums in a sector
where costs have risen sharply and competition had previously driven rates
down.

Royal and Sun Alliance said it had increased UK motor rates by over 30
percent in the last year. It said it had also increased U.S. commercial rates
by eight percent and Australian commercial rates by 25 percent.

Mendelsohn said the group had taken strong corrective action on
underperforming lines of business.

This improved the combined operating ratio, the main measure of underwriting
performance, to 108 percent in the first quarter from 109.5 percent in the
first quarter a year ago and 109.4 percent for whole of 1999.

Mendelsohn said he considered the group's target for an average operating
ratio of 103 percent for 2001 "realistic and achievable."

Analysts were however not impressed with the improved underwriting
performance. "There's absolutely no sign of any amelioration in underwriting
conditions since this time last year," said Teather & Greenwood analyst Tim
Young.

"The marginal improvement in Royal & Sun Alliance's combined ratio is just a
function of more typical weather conditions," he said, adding he was
downgrading his profit forecasts.

ACCELERATION IN IMPROVEMENT EXPECTED

Chief Executive Bob Mendelsohn said he expected the rate of underwriting
improvement towards the 103 percent target to accelerate later this year.

"As the impact of our pricing and underwriting actions work their way into
results, they should more than offset the impact of losses coming through
from business written in prior years at less than premium rates," he said.

Royal and Sun Alliance's investment returns were hit by the loss of 28
million pounds related to the repayment of capital to shareholders with a
special dividend in 1999. This helped increase earnings per share by nine
percent to 5.9 pence.

It said the first quarter results were also distorted by the acquisition of
general insurers Trygg-Hansa in Sweden and Orion Capital in the United
States, which incurred merger costs.

Mendelsohn told a news conference call that cost savings of $100 million a
year were now expected by 2001 from the Orion buy, twice the initial estimate
of $50 million.

MENDELSOHN OPTIMISTIC

Mendelsohn said he was optimistic about the future of Royal and Sun
Alliance's share price, citing his own purchase of 50,000 shares in the last
year, despite its recent falls.

"We've taken all of the business actions that we can take to provide the kind
of shareholder return in the long run that should command a premium rating in
a rational market," he said.

Royal and Sun's price to book of about 0.8 is more than 40 percent below the
sector average and its price to expected earnings multiple of around 10 is
well below its main peer CGNU Plc on 17.

Analysts pointed out that Mendelsohn had said a year ago he was optimistic
then that the first quarter profit for 1999 of 145 million pounds would be
worst of the year and the company was recovering.

"Words come easy, but the results speak for themselves," said HSBC's Hudson.
Some other analysts said Royal and Sun was now cheap after seven quarters of
disappointment and was primed to rise sharply when the insurance cycle and
its profits turned.

"It's a very, very cheap share," said Schroders Salomon Smith Barney analyst
Trevor May. "There'll be one quarter somewhere where they surprise on the
upside, and when they do you won't see them for dust," he said.


WATERFALL HOLDINGS: Receives ?22.7m Bid from Allied Leisure
-----------------------------------------------------------
This is London   May 4, 2000

Allied Leisure is strengthening its position in the snooker clubs business.
It has made a 55p-a- share cash offer for rival Waterfall Holdings which
values Waterfall at ?22.7 million.

The deal, which follows bid speculation, will add 55 sport clubs to Allied's
100 and allow the company to capitalise on its Rileys pool and snooker brand.
Allied already controls 23.8% of Waterfall. It has irrevocable acceptances
for a further 30.4% of the equity.

Allied chief Neil Goulden said he did not anticipate the deal would run into
competition policy difficulties.

Separately, dance-halls operator Luminar today announced a 53% rise in full-
year pre-tax profits to ?12.7 million on a 45% rise in turnover to ?74.1
million.


WHITBREAD PLC: Investors Left Unimpressed, Shares Slipped Back
--------------------------------------------------------------
Reuters   May 4, 2000

British brewing and leisure group Whitbread Plc reported a 7.1 percent rise
in annual profits on Thursday, but its shares slipped back with investors
left unimpressed by a lack of fresh strategic direction.

Its shares drifted off three pence to end at 577p. The stock failed to excite
interest and volume was less than one million shares, despite above expected
profits and the benefit of a tick-up in UK consumer confidence.

"Although this was a generally good trading performance, there was little of
interest for the investor," said one leading drinks industry analyst.

Whitbread has lost favour with investors after failing to clinch a UK pubs
deal with Allied Domecq last summer. Analysts say the group lacks real focus
and has failed to interest investors with a new strategy for growth.

The group, which brews Stella Artois beer in the UK and runs Brewers Fayre
pubs, Beefeater restaurants and David Lloyd health clubs, reported pre-tax
profits for the year to March 4 of 391.2 million pounds ($611.3 million)
against 365.3 million a year earlier, on turnover up 7.5 percent to 3.5
billion pounds.

It proposed a full-year dividend payout to shareholders of 29.50 pence a
share, up 6.2 percent.

Whitbread said it had benefited from a strong second half recovery,
especially at its UK Marriott and Travel Inn hotels and David Lloyd health
clubs driven by improved consumer spending, which had continued into March
and April.

"We benefited from an improvement in consumer confidence in our second half
and trading conditions have continued positive in the first two months of our
new financial year," said Chief Executive David Thomas.

He added that the group's focus was on fast-growing areas such as pubs,
restaurants, hotels and its David Lloyd health clubs as part of its aim to be
the leading leisure company in the UK. While its brewing and leased pubs were
"very robust", he said they were positioned in slower growth markets.

"The results were OK overall, but Whitbread is largely a restructuring story.

There was also a worry in restaurants with Beefeater like-for-like sales
down," said another analyst.

Thomas said the group was looking at its options for the future of its UK
beer business, and if there were opportunities to add value then the company
would take them up.

Most in the industry interpreted this as Whitbread exiting brewing by the
summer and expect a sale for around 300 million pounds. Talks with favoured
buyer Belgian privately-owned Interbrew [ITB.CN] are taking place, with Dutch
beer giant Heineken NV seen as another possible buyer, an industry source
said.

Its beer business, which brews licenced brands Stella and Heineken together
with Boddingtons, increased its share of the UK beer market to 16 percent
from 15.5 percent a year ago.

Whitbread shares have underperformed the FTSE All-Share index by almost 50
percent over the last year, and have even slipped behind other brewing and
pubs companies as the group fell out of the blue-chip FTSE 100 index in
March.

Its shares have tumbled from 11.30 pounds in June 1999, when it was on the
verge of clinching deal to buy Allied pub estate, to 419p in February after
the deal collapsed.


S U B S C R I P T I O N   I N F O R M A T I O N

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