European shares higher on M

PARIS, Mar 24 (Reuters) European shares rose on Friday as mergers and acquisitions activity resumed a feverish pace, while strong crude and record metals prices boosted oil and mining stocks.

German drugs firm Schering rose 4 per cent after a bid from Bayer, while Alcatel added 2 per cent after it confirmed it was discussing a potential merger with U.S. telecoms equipment maker Lucent Technologies.

''There is still plenty of M&A coming through, companies are awash with cash,'' said European equity strategist Charles de Boissezon at Deutsche Bank.

''That will continue to fuel the market higher for the time being. Later on in the year is another story, but in the short term it is certainly a driver,'' he said.

The FTSEurofirst 300 index of leading European shares has been buoyed by a stream of takeover stories. At 1150 GMT (1720 IST) it was up 0.3 per cent to 1,380.85 points, near five-year highs.

Bayer rose 1 per cent after it unveiled a 16.3-billion-euro (.5-billion) bid for its domestic rival, trumping an offer from another German firm, Merck.

A merger between Lucent and Alcatel would produce a company larger than Cisco Systems and would mark the latest round of consolidation in the telecoms and media sector.

''Lucent and Alcatel could start a new wave of consolidation ... as corporate activity looks to take off for the second quarter,'' said Neill Pickering, head of derivatives trading at Pacific Continental Securities.

That news also fuelled a 5 per cent rally in the shares of French defence firm Thales, in which Alcatel has a near 10-percent stake, on rumours that there could be changes in the Thales shareholder structure.

Thales has been at the centre of speculation that some of its operations could be hived off and merged with European aerospace group EADS or Alcatel.

''Alcatel will have little time to think about Thales, and that will have to take a back-burner position,'' SG analyst Zafar Kahn said. ''That clears the way for EADS to be thinking about doing the Thales deal, which is much more sensible in most people's view.'' OIL STOCKS, MINERS RISE Oil stocks gained, with the price of crude holding near after hitting a near seven-week high as renewed supply woes in Nigeria increased expectations of prolonged outages in Africa's largest producer.

Royal Dutch Shell rose nearly 2 per cent, while BP and Total were both up 1.4 per cent.

Miners were also up strongly as silver hit a fresh 22-year high and copper traded near all-time highs.

Anglo American and Rio Tinto were both up 2 per cent.

Britain's Compass Group, the world's biggest caterer, was another strong gainer. Its shares jumped 3 per cent after it said it had appointed Richard Cousins, former boss of plasterboard maker BPB, as chief executive, ending uncertainty over the search for a new boss.

UK supermarket Tesco gained 3.4 per cent on a report it might put its property portfolio into a Real Estate Investment Trust.

On the downside, Infineon lost more than 4 per cent after Goldman Sachs said on Thursday it was placing 136.3 million shares in the German electronic chipmaker on behalf of industrial conglomerate Siemens.

REUTERS SD PC1812