LONDON (Reuters) - Britain's top share index ended higher on Friday as Unilever (>> Unilever plc) rallied after a surprise $143 billion takeover bid from Kraft Heinz Co (>> Kraft Heinz Co), leading the index to its third straight week of gains.
The benchmark FTSE 100 <.FTSE> index finished 0.3 percent higher on the day and gained o.6 percent for the week. The index, dominated by companies that trade internationally, was also supported by weakness in sterling after a drop in British retail sales for January.
Unilever's rally stole the show, though. The shares surged to a record high before finishing 15 percent higher, even as Unilever rejected the bid by Kraft Heinz, saying the deal had no financial or strategic merit.
"This is cheap money meeting industrial logic. Putting portfolios of brands together can create huge synergies across marketing, manufacturing and distribution," said Steve Clayton, a fund manager at Hargreaves Lansdown.
"Unilever were clearly in no mood to sell ... A short-term premium today is no compensation for losing the growth that Unilever could produce for decades to come. So to win over a majority of Unilever’s shareholders, we think Kraft Heinz will need to dig very deep indeed."
Pharmaceuticals stocks were also in demand, with the sector index <.FTNMX4570> gaining 1.4 percent, supported by a rise in shares of AstraZeneca (>> AstraZeneca plc).
AstraZeneca rose 1.6 percent after saying that its drug Lynparza, already approved to treat ovarian cancer, met the main goal of helping breast cancer patients live longer without their condition worsening in a late-stage study.
"The AstraZeneca turnaround story largely hinges on what happens to its oncology portfolio, and progress with Lynparza is an important element of that turnaround," Berenberg analysts said in a note.
Coca Cola HBC (>> Coca Cola HBC AG) closed 4 percent higher after setting a record high. The soft drinks bottler extended Thursday's gains after well-received results, with JP Morgan, Exane BNP Paribas and Jefferies raising their price target for the stock.
However, gains in the broader market were capped by weaker commodities-related stocks following a fall in oil and metals prices. The UK oil and gas index <.FTNMX0530> and the mining index <.FTNMX1770> both dropped more than 1 percent.
Anglo American (>> Anglo American plc), BHP Billiton (>> BHP Billiton plc), Glencore (>> Glencore PLC) and Royal Dutch Shell <RDSa.L> fell 1.3 to 1.8 percent.
Among mid-caps, shares in Essentra (>> Essentra PLC), a supplier of speciality plastic and packaging components, surged 15 percent after its results.
(Editing by Angus Larry King)
By Atul Prakash and Helen Reid