European shares lifted by M&A deals

European stock markets rose on Monday as investor sentiment was boosted by vast merger and acquisition deals in the advertising and pharmaceutical sectors, dealers said. In late morning deals, London's FTSE 100 index of leading shares added 0.25 percent to 6,571.02 points and Frankfurt's DAX 30 advanced 0.26 percent to 8,267.29 points. In Paris, the CAC 40 climbed 0.30 percent to 3,980.74 points compared with Friday's close. The euro edged higher to $1.3288 from $1.3278 in New York late on Friday and the dollar rose to 97.95 yen from 98.20 yen. On the London Bullion Market, the price of gold rose to $1,330.70 an ounce from $1,331 on Friday. French group Publicis and its US rival Omnicom announced on Sunday the merger of the two advertising giants in a blockbuster deal to form a global leader in the sector. The new group, in which the capital will be split 50-50 between the shareholders of the two companies, will be called the Publicis Omnicom Group, combining the current second- and third-largest advertising firms, worth about $35.1 billion (26.5 billion euros). Shares in Publicis, which is listed on the CAC 40, are suspended until 1330 GMT when the US stock market opens. "The tie up between Omnicom and Publicis creates the world's largest ad agency with combined revenues of $23 billion, but perhaps equally importantly demonstrates that in some quarters at least, the M&A space is still alive and well -- even entering into the traditionally quieter summer months," said Matt Basi, head of UK sales trading at CMC Markets. "Any sign that deals of this nature are back on the table might give bulls the required impetus to push equity markets to new highs." The huge deal will bring together such top ad agency brands as Saatchi & Saatchi, Leo Burnett, Razorfish, BBDO, Ketchum, to name a few. Their clients include such major producers as Nike, LVMH, Nestle from Publicis and Volkswagen, Unilever and ExxonMobile from New York-listed Omnicom. "We are talking about industry where mergers seem to be natural occurrence, but this one is a giant one," added analyst Anita Paluch at Gekko Markets. "It relies primarily, as all major mergers do, on the premise that synergies will be achieved and costs will be cut. "This in turn should help them to be more active in Asian and Latin American markets to counterbalance the weak growth in Europe." The new entity, which is subject to anti-trust approvals, will leapfrog the WPP group as market leader. However, WPP shares were showing a gain of 1.62 percent to 1,194 pence. In Paris, shares in French advertising group Havas rose by 5.84 percent to 5.72 euros, with analysts saying that the scale of the deal would trigger reviews and negotiations of contracts which would raise opportunities for other big ad groups to gain business. -- Huge deal in Irish pharma sector -- Markets won a further M&A boost on Monday after US drugs company Perrigo agreed to buy Irish biotech firm Elan for about $8.6 billion (6.5 billion euros) in cash and shares. The purchase is aimed at creating a global group with the strength to pursue expansion, and a new holding company will be based in Ireland. Basi added: "Perrigo's $8.6-billion acquisition of Irish pharmaceutical group Elan, coupled with news of the Omicom/Publicis tie-up, lends support to the argument that the M&A space may yet grind back into life. "If CEOs continue to see value in equity markets at these levels, we may yet see traders pushing stocks to new high in anticipation of more deals on the horizon." On the downside in London, British bank Barclays topped the FTSE 100 fallers board after revealing that it would update the market on its capital position on Tuesday. The Sunday Times newspaper had reported that Barclays was exploring a £4.0-billion (4.64 billion euros, $6.16 billion) rights issue to meet regulators' concerns over its financial strength. In reaction, however, Barclays shares slumped 3.58 percent to 308.7 pence. In Paris, shares in nickel mining group Eramet plunged 7.65 percent after the company reported a net loss for the first quarter. Shares in spectacle lense leader Essilor rose by 3.97 percent because the firm has done a deal to buy all of US firm Transitions Optical and of sunglass lense maker Intercast. Shares in German industrial conglomerate were up by 0.14 percent at mid-day to 79.82 euros. Over the weekend the company said that it would replace chief executive Peter Loescher who has been criticised for missing targets.