Bid talk leaves Europe mixed
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PARIS, France (Reuters) -- Talk of mergers and acquisitions stirred up European shares on Monday, with UK cellphone firm mmO2 soaring but Dutch rival KPN down as its failed bid approach stoked speculation of a takeover battle.
Wanadoo was another star performer, up 15.5 percent as parent France Telecom launched a bid to acquire full control of the French Internet services provider.
Weakness in selected technology issues like Dutch chip equipment maker ASML trimmed market gains late in the session, as worries share prices in the sector had hit lofty levels after last year's surge hit the Nasdaq Composite.
But telecom equipment makers and tech bellwethers Nokia and rival Ericsson gained 1.5 percent and 2.5 percent respectively as Merrill Lynch raised its estimates for 2004 and 2005 mobile handset sales by roughly five percent.
The FTSE Eurotop 300 index of pan-European blue chips ended 0.19 percent higher at 1,013.13 points, off an earlier session-high of 1,017.21, but still within a whisker of last week's 19-month high of 1,019.34 points.
Shares in mmO2 jumped 16.6 percent on talk of a possible takeover battle, even though KPN Chief Executive Ad Scheepbouwer said his company had no plans to make a hostile bid. KPN shed four percent as investors shrugged off news it had turned to a big profit in 2003 to focus on its overtures to mmO2.
Equity markets have been rife with M&A buzz in recent weeks, fired up by drug maker Sanofi-Synthelabo's hostile bid for rival Aventis and Vodafone's failed attempt to take over U.S. rival AT&T Wireless.
The growing number of mergers and acquisitions talk, which all but disappeared during lowest months of a three-year market downturn, mark a return of confidence in equities fundamentals and prospects, strategists said.
"European companies are throwing off cash at the highest rate for over 15 years," said Credit Suisse First Boston strategist Nick Nelson. "Given the very low returns on cash, companies may do one of three things with this cash.
"They could return it to shareholders, they could use it to finance acquisitions or they could use it for investment. In their own way each of these three approaches could help the market."
Hostile bids have traditionally been frowned upon by European companies, derided as value-destroying and distracting, but with valuations well below their bull market peaks some firms may see logic to hostile bids that can boost growth and cut costs.
"More hostile bids in cash would be positive. Share offers can be dilutive but a cash offer could be seen as a good use of cash if companies do not see an opportunity to grow organically," said Merrill Lynch strategist Khuram Chaudhry.
Another M&A talking point on Monday was Standard Chartered as the death of its largest single shareholder rekindled speculation the Asia-focused British bank has become a takeover target. Its shares closed 3.3 percent higher in London.
Wanadoo shares climbed on the back of France Telecom's offer, which values Europe's second-biggest ISP at around 13 billion euros, but France Telecom shed 2.9 percent as analysts said the offer would dilute its earnings per share and disagreed on how sustainable the cost savings will be with France Telecom running a single Internet access under one roof.
Germany's T-Online rallied 5.7 percent as France Telecom's long-awaited bid announcement prompted hopes that Deutsche Telekom may bring its own high-growth Internet business under one roof.
And Belgium's Mobistar, 50.8-percent owned by France Telecom's mobile arm Orange, also gained five percent on renewed speculation the French group could decide to buy out minority shareholders in the Belgian mobile phone operator.
In New York, the Dow Jones industrial average was 0.4 percent lower by 1720 GMT, while the tech-laden Nasdaq Composite shed 1.3 percent.
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