European Stocks Advance Amid M&A Deals, U.S. Sanctions on Russia

Apr 28, 2014 12:04 pm ET

April 28 (Bloomberg) -- European stocks advanced as companies from AstraZeneca Plc to Bayer AG rose amid an increase in mergers-and-acquisitions activity, offsetting new U.S. sanctions against Russian individuals and companies.

AstraZeneca jumped 14 percent to a record after Pfizer Inc. confirmed its interest in taking over the U.K. drugmaker for almost $99 billion. Bayer climbed 3.3 percent after it posted first-quarter profit that beat estimates and as it was said to explore a sale of its plastics unit. BP Plc, which holds a stake in OAO Rosneft, fell 1 percent as the Russian company’s chief executive officer came under U.S. sanctions. Siemens AG slipped 2.5 percent after it was said to have made an offer for Alstom SA to beat a bid from General Electric Co.

The Stoxx Europe 600 Index added 0.2 percent to 334.13 at the close. The benchmark gauge earlier erased an increase of as much as 0.6 percent after the U.S. Treasury announced Russian sanctions. The Stoxx 600 rose 0.3 percent last week amid increased deals activity among drug companies.

“In the short-term, the increase in M&A activity that we’ve been seeing helps positive sentiment,” Markus Wallner, an equity strategist at Commerzbank AG in Frankfurt, said. “M&A will continue to support the stock market, but at the same time the Ukraine crisis will continue to cause uncertainty. This means we’ll still see volatile daily movements.”

National benchmark indexes advanced in 12 of the 18 western-European markets today. France’s CAC 40 gained 0.4 percent and Germany’s DAX rose 0.5 percent. The U.K.’s FTSE 100 increased 0.2 percent.

Russia Sanctions

The Obama administration imposed sanctions on seven Russian officials and 17 companies linked to Russian President Vladimir Putin’s inner circle involved in banking, energy and infrastructure.

The list includes Rosneft CEO Igor Sechin and Sergei Chemezov, director general of State Corporation for Promoting Development, Manufacturing and Export of Russian Technologies High-Tech Industrial Products, also known as Rostec, and banks including InvestCapitalBank and SMP Bank.

The European Union added 15 names to the list of persons sanctioned for “actions undermining Ukraine’s territorial integrity,” EU spokeswoman Susanne Kiefer said in a Twitter post.

AstraZeneca jumped 14 percent to 4,666.5 pence. Pfizer said it proposed buying the U.K. drugmaker on Jan. 5 for 46.61 pounds ($78.52) a share in cash and stock, and AstraZeneca ended talks. A spokeswoman for AstraZeneca said the company is reviewing Pfizer’s latest statement.

Bayer Earnings

Bayer advanced 3.3 percent to 98.95 euros. Germany’s largest pharmaceutical company said first-quarter earnings before interest, taxes, depreciation, amortization and special items rose to 2.74 billion euros ($3.79 billion) from 2.45 billion euros a year earlier. That beat the 2.56 billion-euro average estimate of six analysts surveyed by Bloomberg.

Separately, people familiar with the matter said Bayer is considering options for Bayer Material Science after Evonik Industries AG showed potential interest several months ago.

BP lost 1 percent to 488.35 pence. BP Russian Investments Ltd. owns about 19.75 percent of Rosneft’s registered capital, according to Rosneft’s website.

Siemens slipped 2.5 percent to 93.59 euros. CEO Joe Kaeser will meet French President Francois Hollande to discuss the engineering company’s proposed asset swap with Alstom. People familiar with the matter said Siemens wants to take over Alstom’s power and grid business in exchange for its transport assets and some cash.

Pfizer Preferred

Siemens’s plan seeks to counter a bid by GE to acquire Alstom’s energy business while separating its transport assets, valuing the whole of the French company at $13 billion excluding debt. Alstom prefers GE’s proposal, the people said.

Bouygues SA, which holds a 29.3 percent stake in Alstom, climbed 2 percent to 32.25 euros.

Meda AB fell 7.8 percent to 118.50 kronor, its largest slide since Aug. 2. The Swedish producer of the Dymista allergy medicine rejected a second bid from Mylan Inc., the biggest U.S. generic-drug maker.

Alfa Laval AB fell 5.4 percent to 170.50 kronor, its biggest drop since October 2012. The maker of heat exchangers said first-quarter pretax profit amounted to 794 million kronor, compared with the 1.02 billion kronor analysts had expected.

The volume of shares changing hands in Stoxx 600 companies was 32 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.