London - A proposed $70 billion takeover of BG Group by energy firm Royal Dutch Shell lifted top UK shares on Wednesday to outperform pan-European equities and buoyed the battered energy sector.
The UK FTSE 100 index was up 0.5 percent at 07h47 GMT, at 6,993.82 points, better than a 0.2 percent rise for the FTSEurofirst 300 index and creeping up towards an all-time high of 7,065.08 points reached on March 24.
Shares of BG were up 38.0 percent, trading at their highest level since September, while Shell's A shares were down 2.7 percent. The terms of the agreed deal, which represented a premium of around 52 percent to the 90-day trading average, were seen by investors and analysts as effectively re-rating the battered energy sector after sharp declines in the oil price.
“It looks as though Shell is paying a reasonably high premium,” said Paul Mumford, fund manager at Cavendish Asset Management, which manages around 1 billion pounds in assets and owns both Shell and BG.
“It's almost cheaper to buy a company than drill for oil yourself in this type of environment. Shell has had some difficulties in its exploration programme and this looks like quite a good quick-fix solution.”
Rival energy group BP rose 3.8 percent, and Tullow Oil was also up 9.9 percent, with traders citing increased merger expectations.
Pay-TV group Sky was up 2.7 percent after Reuters reported that French media conglomerate Vivendi was looking at a possible acquisition of Sky as one of several options to expand the reach of its own TV group Canal Plus, according to three sources familiar with the matter.
Foreign investors are snapping up British companies at the fastest pace in eight years, according to Reuters data, despite a looming general election that investors think will feed market volatility over the coming weeks.
The election is shaping up to be the most unpredictable in a generation and Scottish nationalist leader Nicola Sturgeon has raised the prospect of another independence referendum after 2016 that could break apart the United Kingdom.
“The election still failing to dent the index's strength,” said Connor Campbell, analyst at Spreadex.
Shares of Easyjet were slightly positive after the airline reported a 7.5 percent rise in passenger traffic for March.
Reuters