Burberry jumps to new high on bid speculation

LONDON Wed Dec 8, 2010 6:36am EST

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LONDON (Reuters) - Shares in Burberry surged as much as 6.5 percent to a new high on Wednesday, with traders citing talk of bid interest for the luxury goods group.

Traders in London and Frankfurt said there was talk the 154 year-old maker of raincoats and handbags was subject of a bid at 1,500 pence per share. They gave no further details.

Burberry declined to comment.

The British-based group, one of the few global luxury groups not to be family-controlled, has been the subject of bid rumors for months as sales at top-end brands recover, driven by strong demand from Asia.

"The main attraction is its freefloat and it's not got a controlling family holder. It's the only luxury group that is independent," said one trader.

"It's a good company, actually, very well run."

Takeover speculation has intensified after French luxury group LVMH bought a 17 percent stake in peer Hermes in October.

However, some traders and analysts are skeptical whether a bidder would target Burberry, whose shares have more than doubled this year, driven by strong results as well as the takeover talk.

"The only bidder I can see paying this kind of multiple is a Chinese (company) looking for a trophy asset," said one trader.

Private equity firms have often been tipped as potential suitors, although Citi analysts have poured cold water on this.

"We see little strategic or financial rationale for private equity money to enter at such a late stage in Burberry's transformation story," they wrote in a recent research note.

At 1105 GMT, Burberry shares were up 4.1 percent at 1,176 pence, off a record high of 1,204 pence, and valuing the business at about 5 billion pounds ($7.9 billion).

($1=.6371 Pound)

(Reporting by Simon Jessop, Mark Potter, Harpreet Bhal and Simon Falush in London and Christoph Steitz in Frankfurt; Editing by Hans Peters)

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