Last updated: February 18, 2010 8:23 pm

ABB’s acquisitive mood leads to big gains

ABB was the biggest riser among European stocks on Thursday as the Swiss-Swedish engineering group confirmed that it was considering acquisitions as it announced fourth-quarter profits that were double last year’s.

The world’s biggest builder of power grids gave a positive outlook for 2010 and said it was looking to make acquisitions, but refused to offer any details.

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Its shares added 7.6 per cent to SFr21.28. ABB topped the FTSE Eurofirst 300 which closed 0.7 per cent higher at 1,021.66.

The company, which is a leader in power transmission and energy efficiency solutions, is renowned for its strong cash position with firepower of more than $10bn to make an acquisition.

Analysts said ABB is relatively weak in the low voltage power application market, thus a potential acquisition would most likely be in this area.

There were rumours that Rockwell Automation in the US, which has a market value of $7.6bn, is a potential target. The acquisition of Rockwell would consolidate ABB’s automation expertise while allowing the company to diversify into software where the US company has a stronghold.

There was also talk that ABB would bid for Brazil’s Weg to help close the gap in the low voltage market.

TF1, France’s largest commercial broadcaster, saw its shares drop after reporting disappointing fourth-quarter earnings. The company which has suffered from a two-year slump in advertising revenues issued a surprisingly downbeat guidance for 2010, despite an improving market.

Bruno Hareng at Oddo & Cie said: “I think the market is recovering nicely but I think the company doesn’t want to disappoint investors, and so has given a conservative profit estimate for 2010.”

TF1 spent €120m ($160m) to acquire the broadcasting rights for the football World Cup, which Jean Baptiste Sergeant at Gilbert Dupont believes will be negative for profitability.

Its shares pared early losses to close down 4.9 per cent to €11.71. The shares are down 9.2 per cent since the start of the year.

Capgemini, Europe’s largest computer consultancy , saw its shares leap after the company reaffirmed its long-term outlook amid signs of improving economic conditions.

The company, which reported earnings above-analyst forecasts, also predicted that profits and sales would dip later this year before recovering. Shares in the group fell as much as 4.1 per cent before reversing losses as investors were convinced that the sector was on the road to recovery. Capgemini closed 6.2 per cent higher at €33.65.

Societe Generale slid 7.2 per cent after the French bank announced it may have to inject more capital into its lossmaking Greek unit Geniki, which is under pressure from the country’s debt crisis. Shares in Société Générale fell 7.2 per cent to €38.98. Meanwhile, Geniki added 1.6 per cent to €0.62.

German carmaker Daimler saw its shares fall 4.7 per cent to €31.50, a five-month low. The group scrapped its dividend for the first time in 14 years, after announcing a worse-than-expected 2009 net loss.

European chemicals companies AkzoNobel and Solvay posted worse-than-expected earnings underlining the uncertain future of the sector, affected by the tough challenges of the financial crisis. Shares in Akso were down 7.4 per cent to €39.40, a five-month low, while Solvay fell 0.9 per cent to €72.70.

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