* FTSE 100 closes up 0.3 pct at 6,825.20 points
* Shire jumps after rejecting bid valuing it at $46 bln
* Traders expect FTSE to challenge 6,900 level soon
LONDON, June 20 (Reuters) - Britain's FTSE 100 rose on Friday on the back of a surge in shares of drugmaker Shire Plc, leaving many traders to expect the benchmark index to test record highs soon.
Shire hit an all-time high and closed up 16.9 percent at 4,371 pence, adding 15 points to the FTSE, after rejecting a bid from AbbVie Inc which would have valued Shire at about 27 billion pounds ($46 billion).
The FTSE 100 closed up 0.3 percent, or 17.09 points, at 6,825.20 points - within reach of a 6,950.60 record set in 1999.
Even though Shire rejected the approach, many traders expected the company to stay in bidders' sights as the drug sector experiences a wave of merger and acquisition (M&A) activity, evidenced by Pfizer Inc's recent attempt to buy AstraZeneca Plc.
"We've been quite bullish on pharma stocks due to the M&A for quite some time. We haven't sold Shire after the spike higher, we're just holding on to it," said Dafydd Davies, senior trader at Prime Wealth Group.
Although the FTSE 100 is only up about 1 percent since the start of 2014, many traders say the index should rally more if it can get past the 6,900 level.
"Other stock markets such as the German DAX and U.S S&P have broken new highs, and it must only be a matter of time before the FTSE follows suit," said Novum Securities technical analyst Adrian Slack.
($1 = 0.5864 British pounds) (Additional reporting by Tricia Wright; Editing by Louise Ireland and David Holmes)