Europe Stocks Rise to Six-Year High on Dealmaking; Scania Gains

Feb 24, 2014 12:00 pm ET

Feb. 24 (Bloomberg) -- European stocks advanced to a six- year high as companies from Scania AB to Dixons Retail Plc rallied amid heightened mergers-and-acquisitions activity, outweighing a drop in HSBC Holdings Plc which posted worse-than- estimated profit.

Scania soared to its highest price since July 2007 after Volkswagen AG offered to buy the remaining stake in the Swedish truckmaker for 6.7 billion euros ($9.2 billion). Dixons jumped 6.7 percent as it confirmed talks with Carphone Warehouse Group Plc for a possible merger. HSBC declined the most in six months. Vodafone Group Plc’s new shares traded after a consolidation and cash distribution.

The Stoxx Europe 600 Index rose 0.6 percent to 338.19 at the close of trading, its highest level since Jan. 14, 2008. The benchmark climbed 0.8 percent last week to its highest level since January 2008 as companies from Meda AB to Valeo SA posted better-than-forecast earnings.

“Earnings have been pretty poor so far,” said Andrea Williams, who helps manage 50 billion pounds ($83 billion) as head of European equities at Royal London Asset Management in the U.K. capital. “This is the final week of big corporate earnings in Europe. So markets will go back to focusing more on the economy after that. It’s a good thing that we’re seeing some deals. It’s good for companies to spend their money to consolidate the industry.”

German Confidence

In Germany, a report showed the Ifo Institute’s business climate index, based on a survey of 7,000 executives, unexpectedly rose to 111.3 in February from 110.6 a month earlier. Economists in a Bloomberg survey had predicted a drop to 110.5 this month.

Lawmakers in Ukraine are working on a coalition government after ousting Viktor Yanukovych as president and giving interim powers to parliament speaker Oleksandr Turchynov. Ukraine spiraled into crisis in November when protesters took to the streets to oppose Yanukovych’s rejection of a deal to deepen ties with the European Union. The violence peaked last week, killing at least 82 people.

National benchmark indexes climbed in 16 of the 18 western European markets. The U.K.’s FTSE 100 advanced 0.4 percent to its highest level since 1999. France’s CAC 40 rose 0.9 percent, for its highest level since September 2008. Germany’s DAX increased 0.5 percent.

Vodafone Shares

Vodafone Group Plc’s new shares traded after adjusting for the cash distribution and share consolidation resulting from the sale of its 45 percent stake in its wireless joint venture with Verizon Communications Inc.

Vodafone said it will give its shareholders about 29.53 pence a share in cash and six new shares for every 11 held. The wireless operator will also issue about 263 Verizon shares for every 10,000 Vodafone shares owned. As a result of these changes, its market capitalization declined to 66.4 billion pounds from 77.9 billion pounds on Friday.

Scania surged 32 percent to 194.5 kronor. Volkswagen, which controls a majority of Scania’s shares and 89.2 percent of voting rights, said late Feb. 21 that it is offering 200 kronor per share for the remaining stock. Preferred shares of Volkswagen fell 6.5 percent to 187.90 euros, its biggest drop in a year. Europe’s largest automaker also reported fourth-quarter earnings that missed estimates.

Dixons, Carphone

Dixons rose 6.7 percent to 50.3 pence and Carphone Warehouse climbed 8.8 percent to 333 pence. The two companies said in a joint statement they are in preliminary talks for a merger. Betaville blog reported earlier, without citing sources, that they are discussing an all-share merger.

Vivendi SA gained 2 percent to 21.25 euros after saying it received an approach about a potential alliance between its French phone business SFR and cable provider Numericable Group SA, controlled by Altice SA. Vivendi, which is preparing to spin off SFR, said it hasn’t received a formal offer. Altice advanced 4.1 percent to 31.20 euros.

Bunzl Plc jumped 6.9 percent to 1,585 pence, its highest price since at least 1988, after saying full-year earnings excluding currency swings rose 15 percent to 82.4 pence per share. That beat analysts’ projections for 78.5 pence a share.

HSBC fell 2.8 percent to 635.7 pence. Europe’s largest bank reported 2013 pretax profit of $22.6 billion, trailing the $24.6 billion median estimate in a Bloomberg survey.

PostNL NV tumbled 20 percent to 3.44 euros, its biggest drop in 13 months, after the Dutch mail service reported a full- year net loss of 170 million euros. Analysts on average had projected a loss of 156 million euros.

RSA Insurance Group Plc retreated 3.7 percent to 97.5 pence after the insurer said it is considering a share sale as a way of replenishing capital. The company may say this week, when it reports full-year results, that it will raise as much as 800 million pounds, the Sunday Times reported yesterday.

--With assistance from Sofia Horta e Costa in London. Editors: Srinivasan Sivabalan, Alan Soughley