Britain's top stock index recorded its biggest weekly rise in five months, with a late boost on Friday when Sky (>> SKY PLC) shares surged by more than 25 percent on a takeover approach from Twenty-First Century Fox (>> Twenty-First Century Fox Inc).
Sky shares recorded their biggest ever one-day percentage gain after the European pay-TV group said it had been approached by Rupert Murdoch's Twenty-First Century Fox (>> Twenty-First Century Fox Inc).
Fox, which owns 39.1 percent of Sky according to Thomson Reuters data, values the company at about 18.48 billion pounds ($23.23 billion) with its bid. Fox will pay 11.25 billion pounds for what it doesn't already own of Sky.
"The deal is likely to see the light of the day as Murdoch has interest in both the firms. It looks more like some tidy housekeeping," said Jawaid Afsar, senior trader at Securequity.
"The news has changed the whole dynamics by putting the sector in play. Some other companies in the sector could attract serious buyers," he added.
Sky helped the blue-chip FTSE 100 <.FTSE> to close 0.3 percent higher, taking the index's total gains for the week to more than 3 percent - the biggest weekly rise since early July.
The week-long rally has been driven by financial stocks, which rose across Europe after the "No" result in Italy's constitutional referendum inflicted less damage than thought.
The market was also helped by the European Central Bank's plan to scale back its monthly asset purchases, a surprise move that lifted euro zone bond yields, which in turn are seen helping reduce pressure on bank profits.
However, the UK banking index <.FTNMX8350> fell 1 percent on Friday after surging 7.3 percent this week - the best weekly gain since April. Barclays (>> Barclays PLC), Lloyds (>> Lloyds Banking Group PLC) and Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) fell 1.3-2.5 percent.
A decision by Britain's financial watchdog to delay its final verdict on setting a deadline for consumers to claim compensation for being mis-sold debt repayment insurance also put pressure on banks.
After large gains in recent days, Chris Beauchamp, chief market analyst at traders IG, said it was "not surprising to see a bit of weakness creeping in".
Shares in "defensive" stocks with steadier incomes and dividends were in demand.
Pharmaceutical companies GlaxoSmithKline (>> GlaxoSmithKline plc) and Shire (>> Shire PLC) rose 1.2 percent and 2.4 percent respectively, while British American Tobacco (>> British American Tobacco plc), Imperial Brands (>> Imperial Brands PLC) and Unilever (>> Unilever plc) gained between 1.1 and 1.9 percent.
AstraZeneca (>> AstraZeneca plc) rose nearly 4 percent after its immunotherapy drug durvalumab, the British drugmaker's most important pipeline medicine, was accepted for review by U.S. regulators to treat bladder cancer, potentially its first use.
(Editing by Jeremy Gaunt and Alexander Smith)
By Atul Prakash and Peter Hobson
Stocks treated in this article : Lloyds Banking Group PLC
, AstraZeneca plc
, British American Tobacco plc
, Capita PLC
, Barclays PLC
, Mitie Group PLC
, Unilever plc
, SKY PLC
, Imperial Brands PLC
, Shire PLC
, GlaxoSmithKline plc
, William Hill plc
, Sports Direct International Plc
, Royal Bank of Scotland Group plc
, WPP PLC
, Twenty-First Century Fox Inc
, Ladbrokes PLC