Novartis in focus as bourses lifted by Novartis-Alcon deal

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A big deal in the pharmaceuticals sector brought Novartis into focus on Monday, as European shares began the new year strongly.

Novartis announced it would buy out majority investors in eyecare company Alcon for $11.2bn, while also taking over Nestlé’s remaining 52 per cent stake in the company in a previously agreed transaction.

Shares in Novartis fell 2.6 per cent to SFr55.05.

“There are quite a lot of positives in the way the transaction is being structured, but to some extent there are some fears about flowback,” said Jeffrey Holford, an analyst at Jefferies, highlighting the possibility that Alcon shareholders might sell off the new Novartis shares they will receive in exchange for their current stakes.

Nestlé rose 1.5 per cent to SFr50.95 on the news after the Swiss food group announced it would launch a SFr10bn share buy-back programme after the Alcon sale was completed.

Sanford C. Bernstein said Nestlé should be “congratulated for a disposal process that has been well managed and has extracted significant value for its shareholders”.

Elsewhere in the sector, Denmark’s Genmab surged 11.3 per cent to DKr91.25, after declining 60 per cent last year.

In the wider market, the FTSE Eurofirst 300 advanced 1.4 per cent to 1,060.73 after adding more than 25 per cent in 2009, its best yearly gain in a decade. The Xetra Dax in Frankfurt was 1.5 per cent higher at 6,048.30 while the CAC 40 in Paris climbed 2 per cent to 4,013.97.

Oil and gas companies rose, after the price of crude climbed above $80 a barrel for the first time since November. In France, Vallourec advanced 4.8 per cent to €133.15 and Total added 1.8 per cent to €45.80. OMV climbed 1.8 per cent to €31.26 in Vienna, while Neste Oil was up 2.3 per cent at €12.70 in Helsinki.

In the semiconductor sector, Infineon jumped 5.8 per cent to €4.10 after its chief financial officer said the company hoped to achieve an operating margin of more than 10 per cent as soon as possible.

Royal Bank of Scotland said the news was “quite positive” for Infineon, reiterating its “buy” rating for the company. The brokerage separately noted that semiconductors rebounded to year-on-year growth in November thanks to strong demand for memory chips.

In the Netherlands, ASML rose 1.1 per cent to €24.26, while STMicroelectronics climbed 0.8 per cent to €6.48 in Paris.

French carmaker Renault jumped 5.5 per cent to €8.20 on positive comments from its senior vice-president for France. Bernard Cambier said he expected a strong first half for the French car market, adding separately that Renault would continue subsidising sales of its cars in a scrappage programme through to the end of February.

Germany’s Draegerwerk announced it would buy back a 25 per cent stake in its Draeger Medical subsidiary from Siemens.

Draegerwerk’s preference shares climbed 4.9 per cent to €31.35 while Siemens gained 2 per cent to €65.47. Separately, Siemens’ chief financial officer said the German conglomerate planned to issue dollar-denominated bonds.

Hotel group Sol Melia was higher after UBS upgraded the company from “neutral” to “buy” and raised its price target from €6 to €6.85. Shares in the group rose 3.9 per cent to €6.13.

Swiss banking software maker Temenos was also higher on a raft of positive broker notes. Its shares rose 4.3 per cent to €28.

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