Europe: Stocks little changed; Stada gains after takeover offer

[LONDON] Merger and acquisition activity among drugmakers led otherwise flat markets in Europe on Monday, while Banco Popular hit a record low after saying it would raise more capital.

The pan-European Stoxx 600 index and Britain's FTSE 100 were little changed, while Germany's DAX inched 0.05 per cent lower.

European shares joined a global stock market rally at the end of last year on growing optimism over the economic outlook, but caution has grown in recent weeks as the first-quarter earnings season approaches and doubts over a fiscal stimulus in the United States emerge.

"Markets continue to struggle to break out from their main ranges," said Alessandro Balsotti, fund manager at JCI Capital in Milan.

"In the last two sessions, potential political, monetary and economic triggers were not missing but the effect on the various asset classes hasn't been significant."

The Stoxx has gained just 0.1 per cent over the past seven sessions - a significant slowdown since the gains it saw after the election of US President Donald Trump.

On Monday, German drugmaker Stada soared 11 per cent, leading gainers on the Stoxx index and hitting a record high. The company said it would support a takeover offer from Bain Capital and Cinven of 66 euros per share, valuing the company at about 5.32 billion euros (S$7.92 billion).

"We believe this is very generous to Stada's shareholders and recommend they accept the offer," James Vane-Tempest, equity analyst at Jefferies, said in a note.

While financial services were top gainers, banks were among the worst-performing stocks.

Spain's Banco Popular was the top faller, down 9.6 per cent after its chief executive said the bank was contemplating a second capital hike to clean up its balance sheet, which contains toxic real estate assets, and that a merger was possible.

"If POP were to consider raising additional equity, it is likely in our view that investors would want to see best-in-class coverage / capital ratios, pushing an equity raise to at least 4.1 billion euros," said KBW banking analyst Daragh Quinn.

Peer Caixabank was also down 3 per cent, a top faller.

Spain's Ibex underperformed peers, down 0.9 per cent.

Fresenius gained 0.8 per cent after saying it was in talks with the generic drugmaker Akorn for a potential takeover.

While Fresenius said there could be no assurance a deal would result from the talks, one trader in Frankfurt said a key question was how the group would pay for the possible acquisition.

"Capital hike or not?" he said.

Barclays fell 0.2 per cent after news that British regulators were investigating the bank and its CEO, Jes Staley, over the handling of a whistleblowing incident.

REUTERS