(Updating with full report)
PARIS (Thomson Financial) - Share prices closed higher in line with Wall Street gains on the eve of the July 4 holiday, while investors were also buoyed by M&A newsflow, notably Groupe Danone's announcement it is in talks to sell most of its biscuits and cereals operations to Kraft Foods for a higher-than-expected 5.3 bln eur, market sources said.
The CAC-40 index ended up 42.89 points or 0.71 pct at 6,069.84.
30 CAC
40 stocks closed 27 closed higher and 13 lower.
Volume for the day was 6.5 bln eur.
On the Matif, July CAC-40 futures were trading up 46 points or 0.76 pct 6,080.5.
The euro was at 1.3621 usd against 1.3631 late yesterday.
In the US, stocks moved higher as investors drew confidence from a smaller-than-expected dip in factory orders and new merger-and-acquisition activity, including Kraft's talks with Danone.
The French group climbed over 2 pct after announcing the negotiations with Kraft as the market welcomed the offer price and looked forward to Danone investing the proceeds in acquisitions, possibly in the high-margin baby food sector.
Danone shares ended up 0.76 eur or 1.25 pct at 61.71.
The price seems rather good,' said an analyst who follows Danone, adding that the French group would also hang on to its biscuit activities in Latin America and India, 'which also seems to be very attractive as these are growth areas'.
In a note, Deutsche Bank analysts referred to an 'exceptionally favorable deal', arguing that subsequent 'acquisitions/buybacks should prove accretive'.
The broker kept its 'hold' rating on the grounds that Danone's price/earnings ratio of over 20 times is 'demanding'.
Danone refused to give any clear indications as to what sort of acquisitions it might make, although chief executive Franck Riboud said Russian partner Wimm Bill Dann, in which Danone recently increased its holding to 18.6 pct, is one of the group's 'strategic axes'.
Danone was overtaken in afternoon trading by Carrefour and PPR, which both surged on M&A speculation.
Retailer Carrefour ended up 1.59 or 3.09 pct at 53.09 on the back of renewed speculation that the Halley family, the company's largest shareholder, is planning to sell its 13 pct stake.
Dealers cited an article in the July issue of Capital as the trigger for the latest speculation. The French business magazine claims that the family has wanted to sell since last year but has failed to reach a unanimous agreement on the terms, as required by their shareholder pact.
There have been regular rumours this year that the Halleys are ready to sell their stake. In March, Les Echos reported that the family had approached several investment funds with a view to selling, while financial news website boursier.com reported that the Halleys had asked two banks to find a buyer for stake at 55-60 eur per share.
PPR, meanwhile, added 3.76 or 2.94 pct to 131.47 as the news that the UK's Kesa Electricals has received approaches for its French household furnishings chain BUT, served to revive speculation about a possible disposal by PPR of its Conforama chain.
A Paris dealer said the potential sale of BUT 'will give a valuation for Conforama', thereby fuelling speculation PPR will sell the unit in order 'to refocus on luxury goods'.
Like PPR's other retail businesses, Conforama has been regularly cited as a divestment option given its lower margins and growth compared to the group's luxury brands.
Car makers Renault -- up 3.18 or 2.69 pct at 121.38 -- and Peugeot -- up 1.25 or 2.09 pct at 61.14 -- also enjoyed strong gains as investors again looked beyond weak monthly sales to focus on the prospects for new models.
Renault's new car registrations in France fell 13.5 pct last month compared to a year earlier, while Peugeot recorded a 1.4 pct decline, according to figures from car manufacturers' association CCFA.
But Renault reassured the market yesterday by stating that orders for the new version of the Twingo, launched on June 15, are ahead of expectations, while also indicating plans to manufacture 40,000 low-cost Logans at its factory in Brazil this year, rising to 60,000 in 2008.
Utilities and other energy-related stocks also figured among the day's biggest movers.
Gaz de France was up 1.08 or 2.89 pct at 38.40 and Suez climbed 0.65 or 1.585 pct to 42.50.
EDF chief executive Pierre Gadonneix said on French radio that a merger between Suez and GDF would lead to the sale of assets, adding that EDF would be willing to buy certain gas assets.
EDF shares dropped 0.89 or 1.09 pct to 80.55 but remained close to all-time highs.
Bouygues, meanwhile, rose 1.62 or 2.61 pct to 63.74. Le Figaro reported that Areva and Bouygues are studying industrial cooperation involving a joint commercial offering of the two companies' skills in civil engineering and nuclear reactors.
Bouygues has been the object of regular rumours about a move for the nuclear power group, possibly in alliance with Alstom, in which Bouygues has a 25 pct stake.
Areva saw profit-taking, closing down 9.76 or 1.20 pct at 804.00. The group confirmed a report in Les Echos that it is studying a uranium enrichment project in the US worth 2 bln usd.
Alstom added 2.79 or 2.24 pct to 127.35, also carried by yesterday evening's announcement it has won an order worth 275 mln eur order from Irish producer Electricity Supply Board to build a new power plant in Ireland.
Outside the CAC-40, airport operator ADP, which has jumped over 50 pct so far this year amid speculation of a further privatisation sale by the French government, added another 4.07 or 4.70 pct to 90.72.
Speculation has been fuelled by a Societe Generale note from Friday, in which the broker repeated its belief that the French government will carry out a full privatisation of its 68 pct stake in ADP.
The broker has a 'buy' recommendation and a 106 eur target price, which it says reflects a 90 pct probability of a privatisation.
In contrast, carrier Air France-KLM was one of the few fallers, closing down 0.59 or 1.72 pct at 33.75, amid continuing concerns about terrorism following the narrowly averted attack on Glasgow airport in the UK.
Elsewher, Alcatel-Lucent added 0.24 or 2.30 pct tp 10.69. The group was boosted by a fresh batch of contracts, including an order from China Unicom to provide IP routing equipment as the basis of a nationwide network update.
EADS slipped 0.07 or 0.29 pct to 23.91.
German government sources said France and Germany are not close to abolishing the dual governance structure of EADS, rejecting an earlier report in Les Echos.
The daily had claimed the two governments will likely make an announcement to that effect on July 16 when Nicolas Sarkozy and Angela Merkel meet in Toulouse.
In other M&A news, Valeo fell initially after the car parts maker admitted it received no acceptable takeover bids from investment funds by yesterday's deadline.
But the shares recovered, ending up 0.30 or 0.76 pct at 39.56, with analysts at Kepler Equities underlining that the news was 'largely expected'.
The broker, which kept its 'buy' rating and 49 eur target price, said the market will turn its focus back to 'operating recovery and probable portfolio reshuffling'.
Valeo said it will now 'concentrate on its strategy of value creation' via 'disposals and targeted acquisitions'.
Rival parts maker Faurecia, meanwhile, was lifted by the newsflow, rising 1.61 or 2.66 pct to 62.13.
Eurotunnel units plunged 0.12 or 16.67 pct to 0.60, adding to yesterday's sharp drop as trade began in the new stock following the conversion of units in Eurotunnel SA and Eurotunnel PLC on a one-for-one basis.
The shares were weighed down today by Deutsche Bank's decision to downgrade its rating to 'hold' from 'buy', although it raised its target price to 0.40 eur from 0.24 eur. tfn.paris@thomson.com gt/dca/gt/dca COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
© 2007 AFX News
