March 19 (Bloomberg) -- European stocks rebounded from last week's losses on speculation ABN Amro Holding NV will be acquired and Imperial Tobacco Group Plc will raise its bid for Altadis SA.

ABN Amro surged to a record after a person familiar with the situation said Barclays Plc is in talks about buying the largest Dutch bank. Altadis jumped, leading tobacco stocks higher. TUI AG, Europe's largest tour company, had the biggest gain in more than three years on plans to buy First Choice Holidays Plc.

Merger and acquisition ``deals continue to come through and this is supportive of the market,'' said Philippe Gijsels, senior equity strategist at Fortis Bank SA's private investment unit in Brussels, which manages $62 billion. ``M&A is becoming more and more important when other drivers such as earnings are slowing.''

The Dow Jones Stoxx 600 Index climbed 1.5 percent to 364.41 at the close in London. The Stoxx 50 also added 1.5 percent, and the Euro Stoxx 50, a measure for the 13 nations sharing the euro, gained 1.8 percent.

So far this year, mergers and acquisitions in Europe have totaled $290 billion, according to data compiled by Bloomberg. Deals reached a record $1.4 trillion in 2006, as companies used cash and relatively low interest rates to take over rivals.

``Takeovers are a factor of support'' for stocks, said Guillaume Duchesne, an equity strategist at Fortis Private Banking in Luxembourg, which manages $76 billion. ``Companies still have a lot of cash.''

European stocks dropped last week, resuming a sell-off that started last month, on concern U.S. loan delinquencies may weigh on growth in the world's largest economy.

`Early Stage'

Barclays might offer about 60 billion euros ($79.8 billion) for Amsterdam-based ABN Amro, according to Keefe, Bruyette & Woods Ltd. analyst Jean-Pierre Lambert. ABN soared 9.7 percent to 29.94 euros.

Barclays said it will make a statement ``clarifying the position'' before business opens tomorrow. The stock dropped 0.8 percent to 677 pence.

The discussions may not lead to a transaction, said the person familiar with the situation, who declined to be identified because negotiations are still at an early stage.

Bank shares had the third-largest gain among the 18 industry groups in the Stoxx 600, following insurers and auto stocks. Lenders last week had their second-biggest decline this year as concern about loan delinquencies in the U.S. escalated.

A Barclays bid for ABN Amro ``should provide some stability for banks which have suffered from negative news from the U.S. over the last two weeks,'' said Michael Scholz an equity strategist at WestLB in Dusseldorf.

`Friendly Dialogue'

National benchmarks gained in all 18 western European markets. The U.K.'s FTSE 100 advanced 1 percent, France's CAC 40 increased 1.4 percent and Germany's DAX climbed 1.4 percent.

Altadis surged 6.4 percent to 46.55 euros. The maker of Cohiba cigars and Gauloises cigarettes rejected Imperial's first offer on March 16. Imperial spokesman Alex Parsons said the British company looks forward to further ``friendly dialogue'' with Altadis, without elaborating.

Shares of TUI gained 9.6 percent to 18.1 euros. Crawley, England-based First Choice, which has a market value of about 1.5 billion pounds ($2.9 billion), said that TUI will own 51 percent of a company that will combine First Choice with TUI's travel business, excluding some hotels.

The British company's shareholders will own the rest. No other terms of the transaction were disclosed.

``Companies will keep bidding for other companies,'' said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London, which manages about $36 billion. ``This activity that has been key to markets will go on and is good news.''

Vinci, Pinault

Vinci SA gained 2.4 percent to 109.89 euros. French billionaire Francois Pinault may ally with the Mittal group as he seeks to buy a majority stake in Vinci, La Lettre de l'Expansion said, citing unidentified U.S. investors.

Pinault, who owns 5.1 percent of Vinci -- the world's biggest builder -- through his family investment company Artemis, may have increased his stake over the past ten days, the financial weekly newsletter said.

Prudential Plc, Britain's No. 2 insurer, rallied 3.9 percent to 708 pence after the Observer yesterday reported an activist hedge fund is building a stake in the company, increasing speculation the company could be pressured to break itself up.

The Tosca fund is believed to have acquired a 1 percent stake in Prudential, the newspaper said without citing anyone. Prudential spokesman Jon Bunn declined to comment.

Alliance Boots Plc gained 1.2 percent to 1016 pence on speculation that Kohlberg Kravis Roberts & Co. and billionaire Stefano Pessina may raise their bid for the largest U.K. drugstore chain by as much as 6 percent to 1,060 pence a share.

`Fair Price'

A new proposal is unlikely to be made in the next week, the Independent on Sunday said yesterday. The newspaper cited a report by Sanford C. Bernstein analyst Luca Solca as saying 1,060 pence a share or higher would be a ``fair price.''

Deutsche Postbank AG, Germany's biggest consumer bank by clients, added 3 percent to 61.96 euros. The lender's fourth- quarter profit more than doubled, helped by higher interest income, gains from stake sales and lower taxes.

Net income climbed to 271 million euros, surpassing analysts' estimates.

DaimlerChrysler AG, the world's fifth-biggest carmaker, added 4.4 percent to 56.37 euros. Goldman Sachs & Co. raised its recommendation on the company to ``neutral'' from ``sell,'' citing probable positive benefits of a reorganization or sale of the Chrysler division.

Swatch Group

Swatch Group AG climbed 5 percent to 318.25 Swiss francs. The world's biggest watchmaker had a 43 percent gain in second- half profit as bankers spent bonuses on luxury Omega and Breguet timepieces and rising wealth in China stoked demand. The watchmaker plans a 400 million-franc share buyback.

AstraZeneca Plc, the U.K.'s second-largest drugmaker, slid 0.7 percent to 2861 pence after partner AtheroGenics Inc.'s experimental drug to fight heart disease failed to reduce deaths or complications like heart attacks in a pivotal study.

The U.K. company, which pledged as much as $1 billion plus royalties if the drug won approval and hit sales targets, made an initial payment of just $50 million.

Wolseley Plc jumped 3.7 percent to 1243 pence. The world's biggest distributor of plumbing and heating equipment said a surge in European sales helped limit a decline in earnings prompted by a U.S. housing slump.

Boehler-Uddeholm AG slid 14 percent to 70.30 euros after surging 30 percent on March 16 on speculation it may be a takeover target. CVC Capital Partners Ltd., Europe's second- biggest leveraged buyout firm, today said it's considering a bid for the Austrian specialty steelmaker.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

Last Updated: March 19, 2007 12:51 EDT