European Markets End Higher on M&A News

Merger headlines involving names like Boots and KPN helped lift major indexes

Major European indexes finished higher Monday, with sentiment boosted by a number of merger headlines. Pharma issues were in the spotlight following positive brokerage comments. Eurozone manufacturing PMI for September came in at 51.7 from 50.4 in August.

Traders eyed a mixed performance on Wall Stret, with an unexpected recovery in September U.S. manufacturing activity suggesting the Fed will continue to pursue a rate hike policy.

In Germany, the Dax index ended comfortably higher, but business was light as many traders celebrated Reunification Day.

Among German companies in the news, DaimlerChrysler (up 1.95% Monday) isn't interested -- not now, nor in the future -- in owning a stake in VW (unchanged), it said in response to media reports it may acquire one.

E.on (up 0.97%) and RWE (up 0.6%) plan to raise power prices by up to 6% next year, Berliner Zeitung reports. ThyssenKrupp (up 0.23%) will raise flat-steel prices in the first quarter, according to media reports. Metro (up 0.34%) is in talks with Permira to sell its Praktiker DIY chain, sources reportedly said.

In the UK, the Financial Times-Stock Exchange 100 index ended with a small gain thanks to local M&A news, an upbeat Deutsche Bank research note on the pharma sector, and stable trading on Wall Street.

In the City, the main focus is on the agreed merger between Boots (up 4.19%) and Alliance Unichem (up 0.52%). Investors are pleased Boots will return £400 million to shareholders prior to the deal via the sale of its HCI unit. The merged entity, Alliance Boots, will have combined sales of over £13 billion. Glaxo (up 0.9%) and AstraZeneca (up 0.76%) gained as Deutsche Bank raised its price targets. Unilever (up 0.76%) was stronger as it launched a €500 million stock buyback.

On a cautious note, British Airways is to fire 3,500 staff as new CEO Willie Walsh takes over this week, The Mail on Sunday reported.

In France, the CAC 40 index gained ground on Monday, supported by advances in healthcare issues and banking stocks. Deutsche Bank reviewed its pharma universe and reiterated its overweight recommendation.

M&A remained high on the news agenda in Paris as Publicis (up 1.77%) led the percentage gainers as financier Vincent Bollore, chairman and majority shareholder of rival Havas, increased his stake in the UK's Aegis to 11.38%, becoming its largest individual shareholder. Rhodia (up 7.7%) jumped on two threads of speculation: first, that it is seeking to sell money-losing units, and second, that a major chemicals giant is looking to take over the group.

Impressive third quarter figures from U.S. group Micron Technology and a report showing global semiconductor sales up 1.7%, year-over-year, in August buoyed tech stocks, including STM (up 2.94%).

Spanish stocks closed higher as with the banking sector strong. Endesa (up 1.12%) gained as it detailed its defense against a takeover bid from Gas Natural bid, promising €7 billion in dividends over 5 years. Repsol (up 1.15%) benefited as it announced another major oil find in Libya.

All eyes are on the telecom sector following news that Telefonica (unchanged) could bid around €20 billion for Dutch group KPN, the Wall Street Journal writes.

Amsterdam's AEX finished broadly in the black. KPN (up 6.97%) gained following news Spain's Telefonica has approached it about a takeover. ASML (up 2.42%) and Philips (up 1.54%) gained on favorable news from the semiconductor industry. Investors were also pleased to hear another VNU (up 0.99%) shareholder is opposed to the planned acquisition of IMS Health.

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