July 19 (Bloomberg) -- European stocks rose for the first day in three, paced by food and drinks makers after SABMiller Plc said it will buy Latin America's second-biggest beermaker and amid speculation Groupe Danone may be bought by PepsiCo Inc.

``Companies are ready to grow,'' said Kris Verheyen, who manages about $300 million at KBC Asset Management in Brussels, including a food and beverage fund. ``We're positive on food and beverage companies in general because they have good exposure to emerging markets and strong balance sheets to buy growth.''

Technology-related companies such as Cap Gemini SA and STMicroelectronics NV advanced after International Business Machines Corp. reported profit that beat estimates.

The Dow Jones Stoxx 600 Index gained 0.2 percent to 281.08 as of 10:41 a.m. in London, as 12 of its 18 industry groups rose. The Stoxx 50 also added 0.2 percent, while the Euro Stoxx 50, a gauge for the 12 countries sharing the euro, climbed 0.5 percent to reach a three-year high.

The Stoxx 600 Food & Beverage Index was the biggest gainer among the industries tracked in the broader benchmark, increasing 1.3 percent. It has been the worst-performing industry since the stock-market rally began in March 2003, with increased competition and declining prices hurting profit margins.

National indexes rose in 12 of the 17 Western European markets that were open. Germany's DAX Index gained 0.3 percent and the U.K.'s FTSE 100 Index was little changed. France's CAC 40 Index rose 0.6 percent as Danone surged to a record.

Miller Lite

SABMiller climbed 6.9 percent to 947.5 pence after agreeing to buy Grupo Empresarial Bavaria for for $5.6 billion. The Colombia-based company's brands include Aguila in its home market and Cristal in Peru.

The world's third-largest beermaker will pay $3.5 billion in stock to Colombia's Santo Domingo family for its 71.8 percent stake. SABMiller, the maker of Miller Lite and Pilsner Urquell, will also pay $2.1 billion in cash to minority shareholders of Bavaria's publicly traded units.

Danone, the maker of Evian bottled water, soared 11 percent to 87.75 euros, leading shares to gain in the Stoxx 600. New York- based PepsiCo was considering offering as much as 30 billion euros ($36 billion) for the French company, according to a July 6 report in Challenges magazine.

PepsiCo denied the magazine's assertion that it built up a 3 percent stake. Officials didn't comment on whether it was interested in making a bid. Stephanie Rismont-Wargnier, a spokeswoman for Danone, didn't immediately return calls seeking comment today.

`Prime Targets'

``Prime targets for takeover are those companies that can give exposure to emerging markets,'' said KBC Asset's Verheyen. ``Danone has a lot of business in China.'' Danone generated about 15 percent sales in Asia last year.

Unilever, the maker of Lipton iced tea and Magnum ice cream, rose 2 percent to 56.40 euros, leading gains in the Stoxx 50. Cadbury Schweppes Plc, which makes Dairy Milk bars and Butterkist popcorn, added 1.9 percent to 550 pence.

IBM, the world's largest computer-services company and No. 2 software maker, yesterday said profit rose 6.6 percent. The three biggest units posted higher revenue than analysts anticipated.

``The picture emerging is of a reasonably pleasing earnings season with reasonably solid results,'' said Michael O'Sullivan, an equity strategist at State Street Global Markets in London. ``Tech is still among the stocks we see investors buying the most.''

Investor Confidence

STMicroelectronics, Europe's second-largest chipmaker, added 1.1 percent to 14.71 euros. Atos Origin, France's No. 2 computer- services provider, increased 1.9 percent to 56.85 euros. SAP AG, the world's No. 2 maker of business-management software, rose 1 percent to 146.91 euros.

Cap Gemini, Europe's biggest computer-services company, gained 1.9 percent to 28.38 euros. NTT Data Corp., Japan's largest computer-services company, agreed to buy 95 percent of Cap Gemini's Japanese business for 4.275 billion yen ($37.9 million).

Investor confidence in Germany, Europe's largest economy, rose to a 10-month high in July as the euro's decline helped exporters.

A measure of institutional and analyst sentiment rose to 37 from 19.5 in June, the ZEW Center for European Economic Research in Mannheim, Germany, said today. Economists expected an increase to 22, the median of 40 estimates in a Bloomberg survey showed.

France Telecom SA, Europe's second-largest phone company by sales, slid 1 percent to 24.20 euros. The company said it is considering an offer for Grupo Auna SA's Spanish mobile business Amena SA, which analysts say may be worth 9 billion euros.

Munich Re, Electrolux

Paris-based France Telecom is studying the books of Spain's third-largest mobile phone operator, spokeswoman Nilou du Castel said. The French company isn't interested in the cable assets of Barcelona-based Auna, she said.

Munich Re, the world's largest reinsurance company, climbed 2.3 percent to 91.35 euros. The company said it's sticking to a target to boost return on equity to 12 percent this year, even after boosting reserves at its American Re unit by $1.6 billion to cover casualty and asbestos claims in the U.S.

Electrolux AB, the world's largest maker of household appliances, climbed 3 percent to 172 Swedish kronor. Its second- quarter operating profit excluding items affecting comparability was 1.89 billion kronor ($241 million), beating analyst forecasts of about 1.80 billion kronor. Sales increased 6.3 percent.

Sanofi-Aventis SA fell 2.1 percent to 68.95 euros. Europe's second-biggest drugmaker said second-quarter sales rose 6.5 percent to 6.69 billion euros, short of the 6.71 billion euros median estimate of 11 analysts surveyed by Bloomberg News.

Invensys, ARM Holdings

Matalan Plc, the U.K.'s largest discount clothing retailer, rose 7.7 percent to 205.75 pence on renewed speculation that Wal- Mart Stores Inc. may make a bid through Asda, its British supermarket chain. Asda spokesman Nick Agarwal said the company won't comment on market speculation.

Invensys Plc jumped 10 percent to 13.25 pence. The U.K. engineer sold its Lambda power-components unit to TDK Corp. of Japan for $235 million to reduce borrowings. Profit rose in the fiscal first quarter, matching analyst expectations.

ARM Holdings Plc dropped 4.6 percent to 115 pence. The company, whose chip designs are used in Nokia Oyj mobile phones and iPod music players, cut its growth forecast this year following lower-than-expected royalties from the Artisan Components Inc. business that it bought in 2004.

Cambridge, England-based ARM expects U.S. dollar revenue, which is about 95 percent of the total, to rise between 15 and 20 percent this year compared with a previous forecast of at least 20 percent.

To contact the reporter on this story: Margo Towie in Brussels at mtowie@bloomberg.net.

Last Updated: July 19, 2005 05:43 EDT