European shares up on M&A frenzy; LSE,Schering soar

LONDON, Mar 13 (Reuters) Takeover fever sent European shares towards 4-1/2 year highs on Monday with the London Stock Exchange jumping 27 per cent and German drugs group Schering soaring 23 per cent. Shares in the LSE surged after it rejected a 2.4 billion pound bid from U.S. peer Nasdaq after Friday's close while Schering shot up to 82.62 euros after German rival Merck confirmed plans to offer 77 euros a share.

The FTSEurofirst 300 index of leading European shares was 0.45 per cent higher at 1,360.27 by 1150 GMT (1720 IST), approaching last month's 1,363.77, its highest level since August 2001.

The rise follows a lacklustre early March for stocks when worries kicked in that the Federal Reserve, European Central Bank and Bank of Japan may all be in a hawkish monetary policy mode together.

However, the upbeat earnings news European companies have generated in recent quarters has led to an upsurge in takeover activity as firms try to grow their businesses with their extra piles of cash.

''Equity markets were quite rightly nervous when they saw bond yields spiralling up last week and people took some risk off the table,'' said Mark Tinker, head of strategy at broker Execution.

''Then you get a reminder of the intrinsic value in equities from all this takeover activity... Every sector has potential bid candidates and every sector has got potential bidders in it.'' BAA TAKES OFF The LSE news also lifted German bourse operator Deutsche Boerse 6.2 per cent while Euronext gained over 7 percent. Nordic bourse operator rose 3.7 per cent and Hellenic Exchanges added 5.4 per cent.

Shares in BAA Plc rose nearly 3 per cent on news Australia's Macquarie Bank is considering an offer for the British airports operator, signalling a possible multi-billion-pound bidding war.

The interest comes as a consortium led by Spain's Ferrovial puts the final touches to a financing package for a potential BAA bid, sources familiar with the situation told Reuters.

French investment bank Natexis jumped a further 9 per cent to set a record high as mutual lenders Caisse d'Epargne and Banque Populaire unveiled a merger plan for the group despite a threatened veto to the deal from Caisse des Depots.

Around Europe, Britain's benchmark FTSE 100 added 0.5 per cent, Germany's DAX gained 0.6 per cent and France's CAC 40 rose 0.4 per cent.

On the flip side of the takeover frenzy, Italy's Banca Intesa and Capitalia slipped as Capitalia's purchase of a stake in its rival was seen as a defensive move to block a potential hostile offer, with a friendly bid now eyed.

''We think that the reiterated statements by the top management of Banca Intesa on a friendly mood and attitude for a potential deal with Capitalia should rule out a hostile bid, although we wonder what would be the outcome of a bid below current market prices,'' Deutsche Bank analyst Marco Veroni said.

''A friendly deal would raise the issue of the management but we think that if a deal is friendly market premium should be low and consequently we see room for an accretive deal.'' REUTERS SD PM1752