U.K. Stocks Advance, Led by HBOS, Banks; Collins Stewart Gains

By Sarah Jones

Aug. 22 (Bloomberg) -- U.K. stocks rallied the most in two weeks, led by financial companies as investors speculated declines were overdone and on expectation takeovers will increase.

HBOS Plc and Lloyds TSB Group Plc gained as Reuters reported Korea Development Bank may be looking to buy Lehman Brothers Holdings Inc. Collins Stewart Plc rose on talk the stockbroker may soon receive a takeover offer from Japan's Nomura Holdings Inc. Liberty International Plc jumped the most in over five months after Simon Property Group Inc. disclosed a stake.

The FTSE 100 Index gained 95.2, or 1.8 percent, to 5,465.4 at 1:57 p.m. in London. The benchmark index has advanced 0.2 percent this week. The FTSE All-Share Index added 1.7 percent today, while Ireland's ISEQ Index increased 3.7 percent.

Goldman Sachs Group Inc. said in report today that European takeovers have drawn a ``line in the sand'' for asset valuations and represent a turning point for the market.

``Either the market is pricing in a 1970s period of low growth and high inflation, or it has become relatively more attractive,'' Goldman Managing Director Anthony Ling and a team of analysts wrote in the report dated yesterday.

HBOS gained 6.3 percent to 289.25 pence. Lloyds TSB, the U.K.'s largest provider of checking accounts, added 5.5 percent to 295.5 pence. Barclays Plc, the U.K.'s third-biggest bank, advanced 5.2 percent to 327.25 pence.

The FTSE 350 Banks Index closed yesterday at the lowest in more than a month and has dropped 4.6 percent this week, its worst week since July 7.

Collins Stewart Climbs

Reuters reported the state-run lender is ``open to'' a potential acquisition of Lehman, citing an unidentified Korea Development Bank spokesman.

Collins Stewart, the U.K. stockbroker that's considering a takeover approach, jumped 4.3 percent to 91.5 pence on speculation Noumra will make an offer.

``Nomura seems to be popular consensus in terms of the rumored bidder for Collins Stewart, but I'm not so sure,'' Jeremy Grime, a London-based analyst at Arden Partners Ltd. said.

Charlotte Kirkham, a London-based spokeswoman for Collins Stewart, declined to comment. Paul Abrahams a spokesman for Nomura wasn't immediately available to comment.

Liberty International, the largest owner of shopping centers in the U.K., jumped 6.6 percent to 933 pence. The shares rose as much as 11 percent after Simon Property, the biggest U.S. real estate investment trust by market value, disclosed a stake of more than 3 percent.

Benfield Group Ltd. surged 29 percent to 349.76 pence after Aon Corp., the world's largest insurance broker, agreed to buy the U.K. reinsurer for 844 million pounds ($1.6 billion).

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

FirstGroup Plc (FGP LN), Britain's biggest train operator, jumped 15.5 pence, or 2.8 percent, to 578 after rival train operator Arriva Plc said first-half profit jumped 32 percent to 47.3 million as the company added buses, won a rail-route franchise and attracted travelers switching to public transit as gasoline prices rose. Arriva 4.8 percent to 747 pence.

Rentokil Initial Plc (RTO LN) dropped 4.25 pence, or 5.8 percent, to 69.5 pence after the world's largest pest-control provider said second-quarter pretax profit dropped 68 percent to 13.3 million pounds and added it may take five years to turn around sliding earnings.

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