European bid and merger activity went into overdrive on Monday, sending the FTSE Eurofirst 300 index to a new 4½-year high.
The pan-European benchmark rose 9.74 points, or 0.7 per cent, to 1,363.96.
Schering, the German pharmaceutical group, soared 26.5 per cent to €84.59 after rejecting an unsolicited €77-a-share offer from rival Merck.
The bid – which represents a 15 per cent premium to Schering’s closing share price on Friday – valued the company at nearly €15bn.
Some analysts felt the bid was too high, but Giuseppe Vita, head of Schering’s supervisory board, said he expected a “white knight” counterbidder to emerge.
Dresdner Kleinwort Wasserstein agreed.
“The deal would create some synergies in oncology, but most cost savings could be implemented without the deal, in our view,” said analyst Tero Weckroth.
“This leads us to expect a competing offer either from another pharma company or private equity. We retain our view that Schering is an obvious candidate for a leveraged buyout, and that with cost savings, the present value of near-term cash flows exceed the current market cap.”
Merck shares fell 4.5 per cent to €79.95, while Novartis – seen by many in the past as a possible bidder for Schering – rose 1.3 per cent to SFr73.45.
Speculation that Nasdaq’s bid for the London Stock Exchange might prompt further consolidation among Europe’s bourses helped push up Deutsche Börse by 7.5 per cent to €111.90 and Euronext by 12.1 per cent to €61.65.
Altadis, the Franco-Spanish tobacco group, climbed 5.1 per cent to €39.25 amid talk that it could be a bid target for Imperial Tobacco of the UK.
Meanwhile, the Italian banking sector continued to attract plenty of interest after Capitalia moved to defend itself from a widely expected bid from Banca Intesa.
Capitalia revealed late on Friday that it had acquired a 2.02 per cent stake in Intesa.
“Capitalia’s move, according to Italian law, triggers a cross shareholding clause that freezes Banca Intesa’s current and future voting rights in Capitalia to 2 per cent, as long as Capitalia maintains its stake in Intesa above 2 per cent,” explained Andrea Vercellone at Credit Suisse.
“According to the same law Intesa can only legally increase its stake in Capitalia via a tender offer for at least 60 per cent of Capitalia’s share capital.”
Alessandro Roccati at Fox-Pitt, Kelton, said: “Intesa therefore has two options: either make a hostile takeover of 60 per cent minimum of Capitalia in cash or look for a friendly merger.”
Analysts see the “friendly merger” scenario as far more likely, although the Italian press claimed that Capitalia would only agree to a merger if France’s Credit Agricole agreed to dilute its 18 per cent stake in Intesa.“We believe that the smart and defensive move by Capitalia confirms that the takeover of the company will not be easy for anyone without Capitalia management support,” said Marco Veroni at Deutsche Bank.
Capitalia shares shed 2.2 per cent to €6.70, while Intesa slipped 0.3 per cent to €5.055. But there were gains for other Italian banks seen as possible bid targets, with Mediobanca climbing 3.8 per cent to €18.42 and Monte dei Paschi di Siennarising 1.5 per cent to €4.595.
Natexis, the French investment bank, hit a record high after confirmation that talks were taking place to turn it into France’s second-biggest financial services group by merging it with rival Ixis.
Banque Populaire, Natexis’ parent company, said it was in negotiations with Caisse d’Epargne, owner of Ixis, about forming a new bank worth at least €20bn. Natexis shares rose as high as €212 before easing back to finish 5.4 per cent stronger at €202.10.
However state-owned finanancial institution Caisse des Depots, which has a 35 per cent stake in Caisse d’Epargne, warned that it might block the deal.
CNP, the insurance group in which Caisse d’Epargne and Caisse des Depots both have stakes, rose 5.6 per cent to €80.75 on talk that it could attract a buyer.
In Lisbon, Millennium BCP launched an all cash €5.7 a share bid for smaller rival Banco BPI. The bid values BPI at about €4.3bn. The move follows BCP’s failed bid for Romania’s top bank last year.
BCP shares fell 4 per cent to €2.43 while BPI soared nearly 26 per cent to €6.03.
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