By Adria Cimin / Bloomberg
Paris: European stocks rebounded as increasing takeovers in the region outweighed concern that slow growth in the US will hurt earnings.
Barclays Plc had the biggest gain in nine months after saying it’s in talks to buy ABN Amro Holding NV in what would be the world’s largest financial-services acquisition. Whitbread Plc headed for the largest rally in 15 years on speculation it will receive a takeover bid.
“Mergers and acquisitions are the only element of support for stocks,” said Roland Lescure, who oversees $100 billion (Rs4,37,250 crore) in assets as chief investment officer of Groupama Asset Management in Paris. “While the market re-evaluates economic and financial risks, we’ll have volatility.”
So far this year, mergers and acquisitions in Europe have totaled $317 billion, according to data compiled by Bloomberg. Deals reached a record $1.4 trillion in 2006, as companies used cash and relatively low interest rates to take over rivals.
Deutsche Post AG limited today’s gains after forecasting operating profit that fell short of analysts’ expectations. Suedzucker AG decreased as the world’s biggest sugar processor said it expects to post a loss.
The Stoxx 600 last week posted its second-biggest drop this year on concern rising loan delinquencies may weigh on growth in the U.S., the world’s biggest economy.
Barclays, the third-biggest UK bank, and ABN Amro, the largest Dutch lender, said they are holding “preliminary discussions.” Shares of Barclays advanced 3.3% to 699 pence.
Whitbread Plc, the UK owner of the Premier Travel Inn budget lodging chain, jumped 12% to 1,956 pence on speculation it may get a takeover bid worth about 4.5 billion pounds ($8.8 billion).
“We’ve heard there’s been some interest from private equity,” said Claire Collingwood, a trader at CMC Markets in London. “It’s been cited around 23 pounds a share.”
“Open skies is leading to speculation about consolidation in the airline industry,” said Mike Powell, an analyst at Dresdner Kleinwort in Madrid with a “hold” rating on the stock. “First-tier airlines like British Airways, Lufthansa and Air France may start buying second-tier airlines.”
The accord, on which European officials will vote this week, would scrap rules that let only four airlines fly between the US and London Heathrow, Europe’s busiest airport.
Deutsche Post slid 5.3% to 21.98 euros. Europe’s biggest mail service said operating profit will rise at least 3% this year, less than analysts expected.
“Shares of companies like Deutsche Post which only give a cautious outlook for 2007 will find it difficult to rise any further,” said Achim Matzke, the head of global technical and index research at Commerzbank AG in Frankfurt.
Suedzucker dropped 9% to 13.50 euros. The sugar processor said it expects to post a loss for the fiscal year ended 28 February after an impairment on its French sugar business.
Friends Provident Plc sank 7.1% to 187.75 pence. The money manager and 175-year-old insurer said stock market declines may have a “dampening” effect on this year’s sales after second-half profit increased less than analysts estimated.
Shares of Volkswagen AG, Europe’s biggest carmaker, rose 0.9% to 105.61 euros. Lehman Brothers Inc. raised its recommendation on Europe’s biggest carmaker, to “equal weight” from “underweight.”