Europe Stocks Advance for a Second Week as Alstom, Glaxo Rally

Apr 25, 2014 7:00 pm ET

April 26 (Bloomberg) -- European stocks posted a second week of gains as companies from Alstom SA to GlaxoSmithKline Plc rallied amid mergers-and-acquisitions activity.

Alstom jumped 20 percent after people familiar with the matter said General Electric Co. has held talks to buy the trainmaker. Glaxo rose 6.2 percent after agreeing to sell its cancer-drug business to Novartis AG. Meda AB surged 15 percent on a report that Mylan Inc. has increased its bid for the Swedish drugmaker. Royal Philips NV tumbled 7 percent after posting earnings that missed analysts’ estimates.

The Stoxx Europe 600 Index added 0.3 percent to 333.5 this past week, with health-care stocks leading gains. Equities declined on April 25 amid concern that the crisis in Ukraine will spiral, leading to tit-for-tat sanctions. The benchmark has still climbed to within 2 percent of the six-year high it reached on April 4.

“The increase in deal activity should provide some support to markets,” Hugh Cuthbert, who helps manage about $1 billion at SVM Asset Management Ltd. in Edinburgh, said in a phone interview. “It’s encouraging to finally see that those with money in their pockets are spending on acquisitions. These companies can see synergy where markets wouldn’t. As an investor, if you’re able to take the industrial approach that these companies do, you can find value in the market.”

European stocks dropped on April 25 after U.S. Secretary of State John Kerry warned Russia that its intimidation of Ukraine would cost it dearly. Russia resumed military exercises along its border with Ukraine on March 24.

“If Russia continues in this direction, it will not just be a grave mistake, it will be an expensive mistake,” Kerry said. “If Russia choose the path of de-escalation, the international community -- all of us -- will welcome it. If Russia does not, the world will make sure that the cost for Russia will only grow.”

European Equities

National benchmark indexes rose in nine of the 18 west European markets this week. The U.K.’s FTSE 100 advanced 0.9 percent, while Germany’s DAX slipped 0.1 percent. France’s CAC 40 gained 0.3 percent. Markets were closed on April 21 for Easter Monday and Iceland shut on April 24 for a public holiday to celebrate the first day of summer.

Alstom climbed 20 percent, leading gains by industrial goods and services companies, after a person familiar with the matter said that GE may offer more than $13 billion for the builder of trains and power plants. Le Figaro subsequently reported that GE is only interested in Alstom’s energy assets.

Trading in Alstom’s shares was suspended in Paris on April 25. The company’s board planned to meet to discuss the potential sale of most of its assets to GE, according to a person familiar with the matter.

Scania Gains

Scania AB, the Swedish truckmaker that Volkswagen AG plans to take full control of, gained 3.8 percent. Swedbank Robur, which controls 1.87 percent of Scania, said that it would accept the German carmaker’s offer of 200 kronor a share. Investors holding a 5.8 percent stake have already rejected the proposed price. Volkswagen, which owns a majority, plans to pursue its bid to buy out minority shareholders only if acceptance reaches 90 percent, the threshold needed under Swedish law to force remaining owners to sell their holdings and delist the company.

Glaxo gained 6.2 percent after Novartis on April 22 agreed to buy the U.K. drugmaker’s cancer unit for as much as $16 billion. Novartis said it would sell Glaxo its vaccines business, excluding flu operations, for $7.1 billion.

Drug Deals

Meda surged 15 percent as the Financial Times reported that Mylan raised its offer for the Swedish drugmaker to 145 kronor a share. The stock soared as much as 12 percent on the news. Meda’s board rejected Mylan’s previous bid earlier this month, without disclosing the reason or giving a price.

AstraZeneca Plc advanced 7.9 percent after the Sunday Times reported that Pfizer Inc. held informal, now-discontinued talks to buy the drugmaker. Separately, Chief Executive Officer Pascal Soriot said on April 24 that the company will seek partners for treatments that fall outside its core areas.

Novozymes A/S jumped 6.8 percent after the world’s largest supplier of enzymes on April 24 said it expects earnings before interest and taxes to increase 8 percent to 10 percent, higher than its previous range of 6 percent to 9 percent. The Danish company reported first-quarter net income of 693 million kroner ($128 million), exceeding the 622 million-kroner estimated by analysts in a Bloomberg survey.

Electrolux AB surged 14 percent as the world’s biggest maker of home appliances said first-quarter Ebit rose 4 percent to 749 million kronor ($114 million). That beat the 613 million- kronor median estimate of analyst projections compiled by Bloomberg.

Philips slid 7 percent after the world’s largest lighting company on April 22 said earnings before interest, taxes, amortization and one-time items fell 13 percent to 368 million euros. The average estimate of analysts surveyed by Bloomberg was for 413 million euros. CEO Frans Van Houten attributed the decline to the adverse effect of currency swings and challenging market conditions in China and Russia.