London shares closed higher on Monday as Vodafone surged amid anticipation of the mobile phone giant’s sale of its stake in Verizon Wireless in the US for $130 bn, dealers said.
The benchmark FTSE 100 index gained 93.26 points or 1.45 percent to end the day at 6,506.19 points.
Vodafone shares climbed 3.59 percent Monday to close at 213.65 pence after the company said it is in “advanced” talks to sell its 45-percent holding in Verizon Wireless to Verizon Communications in a vast deal worth the equivalent of 98.5 billion euros or £84 billion.
The two firms confirmed the agreement after the market closed.
The blockbuster deal — one of the biggest transactions in corporate history — allows Vodafone to bounce back from hefty losses, pay down debt, make new acquisitions and return money to shareholders, according to analysts.
It also marks the group’s exit from the United States market and injects several billion euros into the British economy that is struggling to lift out of the doldrums.
The Financial Times, citing sources close to the situation, said that both sides had agreed in principle to the Verizon Wireless deal, while Verizon management would meet later on Monday to approve the purchase.
The gigantic buyout is the second-biggest merger and acquisition deal in global corporate history, according to data firm Dealogic. The world’s biggest M&A deal remains Vodafone’s purchase of Germany’s Mannesmann for $172 billion including debt, in 1999.
Atif Latif, director of trading at Guardian Stockbrokers in London, said the deal would create a cash pot to fund acquisitions in Europe.
“With this news we could see more acquisitions within Europe to give then a foothold back into markets where they have fallen behind in recent times,” Latif told AFP.
He added that $130 billion was at the top end of analysts’ estimates, and noted that the potential tax bill would likely be less than expected.
Upbeat Chinese and eurozone economic data and receding investor concerns over a possible conflict in Syria also boosted the market on Monday, although Wall Street was closed for Labour day, dealers said.
“Today, the FTSE has sprinted out of the blocks … with a combination of improving Chinese manufacturing figures and the reduced likelihood of military action in Syria probably being the largest contributing factors,” said analyst Alastair McCaig at traders IG.
He added: “A war against Syria looks less likely for the time being. This has lifted the negative pressure that had been stifling the markets, and as a result all major European markets have surged higher.”
Aberdeen Asset Management gained 4.49 percent to 368 pence, mining behemoth Rio Tinto added 4.19 percent to 3,035 pence and housebuilder Persimmon rose by the same proportion to 1,145 pence.
Budget airline EasyJet put on 4.14 percent to 1,284 pence and telecoms operator BT Group ended the day up 3.97 percent at 338.20 pence.
Silver and gold miner Fresnillo was the only major FTSE 100 faller, dropping 2.15 percent to 1,275 pence.
On the currency markets, sterling strengthened to $1.5539 at 5:17 pm from $1.5472 on Friday evening and to 1.1782 euros versus1.1723 euros before the weekend.
London shares jump as Vodafone surges ahead of deal
