European shares rose on Monday, buoyed by a flurry of year-end M&A and expectations that a US bill lowering corporate taxes could soon pass. Thales rose 7.6 percent after the French aerospace and defence company agreed to buy chipmaker Gemalto for 4.8 billion euros. Gemalto shares rose 5.4 percent.
UBS said the deal propelled Thales further into digital technologies and should boost its earnings by 20 percent. Thales said on Monday it had the financial leeway for further acquisitions. Both stocks were among the biggest gainers on the pan-European STOXX 600 index, which rose 0.8 percent to its highest in nearly six weeks.
Euro zone blue chips added 1.2 percent and the UK's FTSE rose 0.4 percent. Unilever sealed a long-awaited deal to sell its margarine and spreads business to US private equity firm KKR for 6.8 billion euros. The consumer goods maker fended off a $143 billion takeover attempt by Kraft Heinz this year and wants to sharpen its focus on faster-growing products.
The KKR deal creates a clearer separation between Unilever's food and home/personal care businesses, making it easier for the company to split in two as a potential defence against a hostile takeover, said a sales trader at a European bank. But analysts at RBC stuck with an "underperform" rating on Unilever stock, pointing to acquisitions it has made over the past two years that added 2.2 billion euros in turnover.
"What we don't know is how the profitability of these acquired businesses compares, but we expect that in aggregate margins will be substantially lower than the Spreads' business's 22.4% EBITDA margin in 2016," they wrote in a note. Unilever shares were flat.
German real estate group Vonovia agreed to buy peer Buwog in a cash deal valuing it at 5.2 billion euros and sending the Austrian company's shares up 17 percent to the top of the STOXX 600.
Among outstanding fallers, IG Group was down 9 percent after the European Union's securities watchdog proposed curbs on core parts of its market. Ryanair fell 4.2 percent. Europe's biggest low-cost airline averted a strike by pilots in Ireland and Portugal after it agreed on Friday to recognize trade unions for the first time.
Credit Suisse cut its rating to "neutral" from "outperform" on concerns of the impact on staff costs and the risk that "labour issues continue to dominate the investment case for an extended period". Fashion retailer H&M fell 4.7 percent, staying under pressure after a series of price target cuts that followed a disappointing trading update last week.
"We sense things will get more difficult and there is more bad news coming through. It's hard for them to compete in the shift online," said Chris Beauchamp, chief market analyst at IG. The STOXX is up more than 7 percent so far this year and remains below a two-year peak hit at the start of November on profit taking and resurfacing worries over political risks in the region.
Sentiment was supported on Monday by expectations that US lawmakers will pass a tax bill in the coming days or early next year. Wind turbine maker Vestas jumped by nearly 5 percent as the bill preserves key tax credits that had been at risk of being removed.