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Europe's merger mania
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November 23, 1998: 1:24 p.m. ET
European markets head higher on speculation of more M&A activity
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LONDON (CNNfn) - Bourses began the week by riding upward on the back of several deals, with speculation of more to come.
A positive start in Asia spread to the European markets, and as hopes of takeover activity grew, the bourses powered higher.
Wall Street's upbeat opening helped all the major bourses to close the day with gains of more than 1 percent.
On a more fundamental note the news that the dollar had reached a two-month high against the mark put a spring in the step of export-oriented stocks.
Deutsche Bank and Bankers Trust (BT) confirmed late in the European day that they are indeed close to negotiating a $9.7 billion merger, sparking hopes of more activity among Europe's financial players.
In London the FTSE 100 gained 2.3 percent, 130.9 points, to close at 5,848.4.
In Frankfurt the Xetra DAX also jumped 2.3 percent, 113.08 points, to 5,024.51.
France's CAC 40 rose 43.11 points, 1.1 percent, to 3,845.81.
In Zurich the SMI bounced 2.8 percent, 196.3 points, to close at 7,334.3.
London had its own giant deal when engineer Siebe proposed to put long-suffering shareholders in rival BTR out of their misery. A merger of the two companies will create an engineering powerhouse with a market value of some 7.6 billion pounds ($12.6 billion).
BTR shareholders who have seen their holdings halve in value over the past year gasped with relief, pushing up the stock by 40 percent to 137 pence.
Siebe shares hit 241 pence, for a gain of 13 percent.
Insurer Guardian Royal Exchange gave up trying to get investors to take it seriously, and instead looked to its peers. The company put itself in play, with its investment advisers said to be looking for a price in excess of 350 pence per share. That would value GRE at 3 billion pounds ($5 billion).
The news breathed life in to the shares, sending them up 14 percent to 350 pence.
Investors began casting around for other bid targets in the sector, driving an 8 percent rise in Commercial & General Union shares and a 6 percent jump at Royal & Sun Alliance.
EMI shares were not so lucky. The stock soared 17 percent Friday on rumors of talks with Rupert Murdoch's News Corp. The shares tumbled 7 percent to 364 pence Monday though, after the music publisher denied such negotiations.
Confirmation that EMI had spoken to Germany's Bertelsmann on an informal basis were not enough to rescue the shares. Investors preferred to concentrate on first-half earnings due out Tuesday. They are expected to be awful.
In Frankfurt Deutsche Bank shares rose nearly 2 marks to 109.35 marks on the merger news.
The real action was elsewhere, though. The buoyant mood spilled over into other banks, with hopes high that Dresdner might come up with a deal of its own. The shares soared nearly 10 percent to close at 71.1 marks. HypoVereinsbank shares gained a similar percentage.
Insurance giant Allianz gained 5 percent to 600.2 marks as analysts said it could be a bidder for the U.K.'s GRE.
Auto stocks benefited from the dollar's revival, with BMW stock rising nearly 3 percent to 1,194 marks, ahead of rises at DaimlerChrysler and Volkswagen.
Financials featured strongly in Paris too. BNP led the sector's charge by rising 8 percent to 429 francs.
Axa, another rumored to be in the frame for GRE, jumped 4 percent to 729 francs.
Broadcaster Canal Plus plummeted 8 percent on news that rival TF1 is teaming up with News Corp in Italy.
In Switzerland the focus on financials elsewhere in Europe did not go unnoticed.
CS Group charged up 7 percent to 243.25 francs, with UBS rising 5 percent to 442 francs.
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