Takeover talk helps FTSE to edge higher

By Lionel Laurent

LONDON (Reuters) – Takeover speculation surrounding companies such as Smith & Nephew and Weir Group helped the FTSE 100 to edge higher on Thursday.

The FTSE 100 index was 0.2 percent higher at 0744 GMT, outperforming slightly lower benchmark indexes in France, Germany, Italy and Spain. Trading volumes were low because of a public holiday in many European countries.

Medical-devices manufacturer Smith & Nephew was the top performer in the FTSE 100 index, up 2.9 percent, extending Wednesday’s gains after a press report of a planned takeover bid from U.S. rival Stryker.

Although Stryker denied it was planning a bid, traders said the return of takeover speculation would continue to support S&N shares.

“There have been bid rumours in Smith & Nephew for ages … People are buying on the back of that,” Mark Ward, head of execution trading at Sanlam Securities, said.

Engineering company Weir Group was also a strong gainer, up 1.5 percent a day after it abandoned efforts to acquire rival Metso. The Finnish company had rejected Weir’s second, improved takeover bid.

Bankers have said a failure to merge with Metso could make Weir, already frequently the subject of takeover speculation, a target for big players such as General Electric or Honeywell that are keen to access the Glasgow company’s lucrative position in U.S. shale.

Merger speculation also spread to hedge-fund manager Man Group. Its shares were up 3.9 percent after it confirmed it was in talks to buy U.S. asset manager Numeric Holdings.

But some disappointment on the earnings front countered the M&A froth in the market.

Kingfisher, Europe’s No. 1 home improvement retailer, was down 6.0 percent even though the group reported a 20 percent rise in first quarter retail profit and said it would pay a 100 million pound special dividend.

“(Results were) marginally behind market and our expectations because of the margin impact to UK profits and a weaker than expected performance in France and China,” Cantor Fitzgerald analysts wrote in a note to clients.

Food-ingredients firm Tate & Lyle reported a drop in profits, hit by a fall in price for its sucralose sweetener and a weaker appetite for soft drinks in the United States.

Water company Severn Trent, meanwhile, reported a 7 percent rise in annual underlying pre-tax profit to 269.1 million pounds, beating the analyst consensus. The water supplier also said it was paying a dividend of 80.4 pence for the 2013/14 financial year, a 6 percent rise.

(Reporting by Lionel Laurent. Editing by Jane Merriman)