The London stock market rallied on Monday as investors cheered on the news that Vodafone Group (VOD), the U.K. mobile network operator, was considering a bid for Cable & Wireless Worldwide (CW.). Shares in Vodafone popped up by 1% and shares in the fixed-line operator rallied by 45% after Vodafone issued a statement confirming “that it is in the very early stages of evaluating the merits of a potential offer for CWW.” Vodafone said it will issue more information about its takeover intentions by March 12, in accordance with takeover rules.
“It’s something that I thought would make a lot of sense for a long time,” said Morningstar analyst Allan C. Nichols, explaining that Vodafone has been buying fixed-line properties in other countries, but it did not own a network in the UK. The move will strengthen Vodafone’s network, Nichols said. However, this is certainly not a done deal, since there is speculation that private equity firms may also be interested in C&W’s assets. “If you’re going to get a bidding war for C&W, it will probably come from private equity instead of Telefonica (TDE),” said Nichols, who notes that Telefonica is another company that would be interested in C&W assets, but it does not currently have a sufficiently healthy balance sheet to pursue a takeover.
The FTSE 100 Index shot up by 53 points, or nearly 1%, to 5,906. The mid-cap FTSE 250 Index also rallied by 108 points, or 1%, to close the trading day at 11,276.
The markets also got a boost after the Greek Parliament announced it had passed the latest austerity measures needed in order for the country to receive a second bailout to pay off its debts.
“What we have seen today is a relief rally, with investors buying into heavyweight financial stocks on the back of the successful parliament vote in Athens,” said Joshua Raymond, chief market strategist at City Index. “The Greek issue has long been an uncertain cloud hanging over sentiment and this has forced stock indices into consolidation mode for much of the past few weeks as investors were unwilling to add too much risk in case the situation imploded. Now that we are close to a final resolution, with Europe set to ratify the bailout, investors’ hands are somewhat free to add more risk to their portfolios.”
Lloyds Banking Group (LLOY) was the standout performer amongst financial stocks on Monday, rallying by 2.3%. Other major gainers included steel giant Evraz (EVR) and the global miner Anglo American (AAL).
For a full view of all the FTSE gainers and losers during Monday's trading session, take a look at Morningstar's Heat Map.
