U.K. Stocks Climb; Alliance & Leicester, ITV Rally on Bid Talk

By Sarah Jones

July 14 (Bloomberg) -- U.K. stocks rallied, boosted by bid hopes, after Alliance & Leicester Plc said it is in takeover talks and on speculation Endemol NV may make an offer for ITV Plc.

Alliance & Leicester surged by a record 48 percent as people with knowledge of the matter said Spain's Banco Santander SA is in discussions to buy the lender. ITV jumped the most in more than 2 years after the Financial Times reported Endemol has not ruled out an offer for the U.K.'s biggest commercial television broadcaster. Shares of Petrofac Ltd. advanced after the oil and gas services provider won a $3.88 billion contract in Algeria.

The FTSE 100 Index gained 90.2, or 1.7 percent, to 5,351.8 in London at 9:49 a.m. as all but five stocks rose. The benchmark has fallen 22 percent since a June 2007 high, the common definition of a bear market, amid global credit losses and the worst U.K. housing slump in 30 years.

The FTSE All-Share Index added 1.8 percent. Ireland's ISEQ Index increased 3.6 percent. Indexes also climbed after the U.S. government said it would support Fannie Mae and Freddie Mac of the U.S. to shore up confidence in the financial markets.

Alliance & Leicester soared 48 percent to 324.75 pence after the mortgage lender said it is in ``advanced'' talks about a 1.3 billion-pound ($2.6 billion) takeover bid.

Two people with knowledge of the matter said Santander, Spain's biggest bank, is in discussions to acquire the U.K. mortgage lender.

``Alliance & Leicester confirms that it is at an advanced stage of discussions regarding a possible offer at an offer price of 299 pence a share,'' the bank said.

Barclays Plc, the U.K.'s fourth-biggest bank, increased 3.9 percent to 278.25 pence. HBOS Plc, Britain's biggest mortgage lender, advanced 2.6 percent to 273.5.

ITV Jumps

ITV leapt 8.4 percent to 41.5 pence, the steepest advance since March 2006. Endemol co-founder John de Mol said he wouldn't exclude making a bid for the British broadcaster, the FT reported. The newspaper cited an interview with de Mol.

Separately, Morgan Stanley upgraded ITV shares to ``equal- weight'' from ``underweight,'' citing valuations.

The company ``trades at its lowest multiple of the last 10 years on depressed earnings assumptions,'' London-based analyst Patrick Wellington wrote in a note to investors. ``We think recent underperformance has gone far enough.''

Petrofac climbed 3.4 percent to 671.5 pence after the U.K.- based oil and gas services provider and its Indonesian partner IKPT won a 241 billion-dinar ($3.88 billion) contract to build a liquefied natural gas facility in Algeria.

The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.

Emerald Energy Plc (EEN LN) advanced 15 pence, or 4.5 percent, to 346 after the U.K. oil explorer operating in Colombia and the Middle East said first-half profit tripled to $12.4 million as energy prices advanced.

Imperial Energy Plc (IEC LN) soared 174 pence, or 23 percent, to 950 after the Times of India reported Oil & Natural Gas Corp. is planning to buy a stake in the oil and gas explorer with operations in Siberia.

Imperial confirmed it has ``received an approach which may or may not lead to an offer being made for the company,'' the company said. The statement didn't name the possible buyer.

Johnson Matthey Plc (JMAT LN) gained 53 pence, or 3.2 percent, to 1,670 after UBS AG upgraded the metals refiner and auto catalyst maker to ``neutral'' from ``sell.''

National Express Group Plc (NEX LN) rallied 39 pence, or 4 percent, to 1,004 after JPMorgan Chase & Co. upgraded the long- distance coach operator to ``overweight'' from ``neutral.''

Wolseley Plc (WOS LN) added 8.5 pence, or 2.9 percent, to 305.5. The company plans to cut hundreds of jobs after a decline in the U.K. and U.S. housing markets, the Sunday Telegraph reported, without saying where it got the information.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.