Euro stocks boosted by TW/AOL link

FTSE up 1.9%

LONDON — European media stocks jumped sharply Monday on news of the Time Warner/AOL merger.

In London, the FTSE was trading 1.9% higher during the afternoon, at one point up 124 points to 6,625. In that surge, more than 30 points were attributable to media companies. The gain fell back by the end of the day, up 102.9 points, or 1.6%.

Media group Pearson rose 15.3% to £19.62 ($32.18); Granada, one of the big ITV network companies, was up 9.2% to $10.48; and Rupert Murdoch’s satcaster British Sky Broadcasting gained 12.5% to $16.58.

Music major EMI was also a star performer, up 15.3% to $11.21, as was legal and business publisher Reed Intl. — part of Reed Elsevier, the parent of Daily Variety — up 9.9% to $8.05.

ITV companies Carlton Communications and United News & Media, which are planning a $12.5 billion merger but may be thwarted by a hostile bid from Granada for either company, were up $5.8% to $9.94 and 5.9% to $13.77, respectively.

“There’s a sense of euphoria sweeping the market, which is driving prices up. It’s a real feel-good factor,” said analyst Paul Reynolds of Deutsche Morgan Grenfell.

Meanwhile, media stocks also soared in Paris, with paybox Canal Plus seeing its value leap 17% to 918 francs ($141). Private terrestrial network TF1 was up 19.7% to $554, and Canal Plus’ main backer, Vivendi, watched its shares rise 9% to $89.

Analysts noted that part of the rise followed a slump in shares late last week.

“It looks like a combination of correcting last week’s drop and reassessing value in the wake of the AOL deal,” said a Paribas analyst.

Canal Plus and Vivendi are majority shareholders in AOL France.

“The Time Warner deal with AOL underlines the marriage between ‘old media’ and ‘new media.’ It’s a question of content and Internet distribution. Clearly, companies like Canal Plus or TF1 have content and are already implicated in Internet,” observed a Canal Plus source.

TF1, Canal Plus and Vivendi are already investing heavily in Internet business, and analysts said that particularly in the case of TF1 and Canal Plus, events in the U.S. have had a positive impact in Paris.

“You have the Time Warner brand and the AOL access expertise. In the cluttered world of Internet, anyone with a strong brand is going to be in a good position to attract and hold subscribers and that’s certainly the case with TF1 and Canal Plus,” said Reynolds.

In Germany, media stocks also rose. Film group Constantin was up 10.4%, TV rights company EM.TV & Merchandising, 14.1%.

(Liza Foreman in Berlin contributed to this report.)

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