European shares rallied by lunchtime on Monday as a £5.5bn private equity bid for UK supermarket chain Morrisons sparked speculation of a higher offer.
The pan-European Stoxx 600 index was up 0.30%, having fallen in recent days after investors took a cautious turn when the US Federal Reserve shifted to a more hawkish position on interest rates last week.
An unsolicited bid for Morrisons by US private equity outfit Clayton Dubilier & Rice sent the stock soaring 31% to just above the offer price of 230p a share. The British firm has rejected the offer, saying it undervalues the chain.
“The shares had previously fallen by 9% over the last year, contrary to the general market direction, and leading to relegation from the FTSE100 in March. Even so, the approach could stimulate some froth in the sector and even shake out other companies who are currently running the slide rule over UK plc,” said Interactive Investor head of markets Richard Hunter.
“The implications of this potential M&A activity have not been enough to prevent the UK indices receiving a hospital pass from both the US and Asian markets on inflationary concerns, and how central banks plan to deal with the situation.”
Supermarket and food supplier stocks rose on the news, with Sainsbury, Tesco, Ocado, B&M Value Retail, Carrefour, Colruyt, ICA Gruppen, Knorr-Bremse, Axfood and Kerry Group all higher.
Travel-related stocks fell as the UK recorded more Covid-19 cases related to the Delta variant, which originated in India. Budget airlines easyJet and Ryanair were lower, along with holiday company TUI and Aeroports de Paris.
Shares in Italian-American vehicle maker CNH Industrial were lower after the company agreed to a deal to buy Raven Industries at an enterprise value of $2.1bn.
