Nikkei near 7-yr high, tie-up talk lifts retail

TOKYO, Feb 19 (Reuters) The Nikkei average rose 0.24 percent on Monday to trade at its highest in nearly seven years as retail stocks jumped on expectations of industry consolidation after Daimaru Inc. said it was considering a tie-up with Matsuzakaya Holdings Co.

Daimaru, which ranks fourth in Japan's department store sector, said on Saturday it is considering forming an alliance with eighth-ranked Matsuzakaya in a deal that would create Japan's largest department store group.

''Retail shares have been laggards and investors immediately pick them up on expectations of industry consolidation,'' said Yosuke Shimizu, general manager of the investment information department at Monex.

Shimizu said those expectations could spread to other sectors such as steel and food.

The Nikkei average rose 42.59 points to 17,918.24 on Monday, its highest since May 2000. It rose as high as 17,931.70 earlier in the day.

The broader TOPIX index rose 0.12 percent to 1,776.70. The index fell 0.12 percent to 1,774.53 on Friday after booking its highest close since April 2006 in the previous session.

Trade was less active with 997 million shares changing hands on the Tokyo exchange's first section. That compares with last week's morning average of 1.1 billion shares.

Advancing shares outnumbered declining ones by 998 to 578.

RETAILERS UP ON INDUSTRY CONSOLIDATION HOPES Retailers Seven&I Holdings rose 1.1 percent to 3,790 yen, and Fast Retailing gained 1.4 percent to 10,010 yen. Japan Steel Works Ltd. climbed 4.9 percent to 1,131 yen.

Daimaru and Matsuzakaya would together have sales of about 1.17 trillion yen (.8 billion), surpassing current leader Takashimaya Ltd.'s 1.03 trillion yen, as well as No. 2 and 3 ranked Millenium Retailing and Mitsukoshi Ltd.

Shares of Daimaru jumped 7 percent to 1,798 yen, Matsuzakaya was untraded with a glut of buy orders at 1,073 yen, up 10.3 percent from Friday's close, Takashimaya added 2.3 percent to 1,681 yen, and Mitsukoshi climbed 4.2 percent to 574 yen.

Among the other gainers, Sapporo Holdings Ltd., which faces a takeover bid by U.S. hedge fund Steel Partners, rose 1.2 percent to 902 yen, a 14 percent gain from Thursday.

Newspapers have reported that bigger rivals Asahi Breweries Ltd.

or Kirin Brewery may bring Sapporo under their wing.

In its latest report, the Nikkei business daily said it was hard to gauge the level of Asahi's or Kirin's interest, and quoted an unidentified Asahi official as saying that it would consider a request for ties from Sapporo but added that Sapporo's share price was too high.

Asahi's shares were up 1.2 percent at 2,005 yen, and Kirin's stock edged down 0.1 percent to 1,909 yen.

REUTERS SP KN0929