By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- The U.K.'s benchmark index held steady
Monday as gains for oil giant BP PLC and deal news in the
medical-devices industry were offset by losses for banking and
mining stocks.
The FTSE 100 was virtually unmoved at 6,001.32 in afternoon
trading Monday.
Smiths Group PLC was the biggest gainer on the main index,
jumping 8.2% after it said late Friday that it has rejected a 2.45
billion pound ($3.88 billion) offer for its Smiths Medical unit
from buyout group Apax Partners.
The division supplies specialist medical devices and contributed
nearly a third of the company's revenue in 2010.
"Ever since Philip Bowman took charge of Smiths Group in late
2007, the expectation has been that its destiny lies in a break-up
of the conglomerate," said Edison Investment Research analyst Roger
Johnston.
"With the turnaround nearly complete and markets in recovery
mode, we felt that it is only a matter of time before a
satisfactory bid will kick-start the process," he added in a
note.
Johnston said other private equity firms could bid for the
medical division because of its strong cash generation, while U.S.
medical device companies such as Covidien Public Ltd Co. (COV)
could be interested because of significant cost-saving
opportunities.
Separately, shares in Smith & Nephew PLC were the second
biggest gainer on the index, jumping 4.1% after the Sunday Times
newspaper reported that Johnson & Johnson (JNJ) is considering
a fresh takeover bid for the manufacturer of replacement knees and
hips.
BP (BP) was also among the top performers, rising 1.4%, after
the oil giant said late Friday that it has inked a share-swap deal
with Russia's Rosneft, under which the two companies will also
cooperate over drilling in the Arctic Ocean.
The two companies are cementing the agreement by handing each
other close to $8 billion of their respective stock.
Goldman Sachs analyst Michele Della Vigna said in a note to
clients that the deal will likely dilute BP's earnings by around
5%.
"We think that this is a unique opportunity for BP to gain
access to a prospective new frontier area, where direct access as a
non-Russian company would not have been possible," Goldman
said.
Jonathan Jackson, head of equities at Killik & Co., said the
deal provides "the potential to access another significant leg of
growth," but added that it would make it much harder for Exxon
Mobil Corp. (XOM), Royal Dutch Shell PLC (RDSA) or Chevron Corp.
(CVX) to make a bid for BP, which could dampen the stock's
prospects.
Another heavyweight climber was Vodafone Group PLC (VOD), which
gained 1.9% after a report in the Mail on Sunday newspaper that the
company is close to selling its 44% stake in French mobile group
SFR for around £7 billion.
French group Vivendi SA , which owns the rest of SFR, will have
the cash to buy the stake within weeks, the report said.
On the downside, most financial stocks were lower, with Barclays
PLC (BCS) dropping 1.2% and Lloyds Banking Group (LYG) down
2.3%.
Fund manager Schroders PLC fell 2.9% after it was downgraded to
neutral from buy at UBS on valuation grounds. And the London Stock
Exchange was also hit by a broker downgrade, falling 0.8% after it
was cut to sell from hold at Citigroup.
Mining stocks were also acting as a drag on the main index as
most commodity prices retreated.
Shares in Rio Tinto PLC (RIO) fell 1.6% and Xstrata PLC slipped 1.1%.