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The idea of a takeover has been a recurring theme as SAS, half owned by Denmark, Norway and Sweden, continued to struggle with losses after a series of costly restructuring plans.
"The story has sparked rumours of an imminent bid. With all the buzz on M&A at the moment, any sort of speculation can send a stock through the roof," said one Geneva-based trader.
SAS shares, at one point up 15 percent, had climbed 13.5 percent by 1109 GMT, with Lufthansa stock up 0.6 percent.
SAS shares are down 54 percent this year, against a 23 percent climb in the broad Stockholm index. .OMXSPI
"These rumours have come and gone over the years and I do not think there is anything more in them now than there was before," said Fondsfinans analyst Hans Erik Jacobsen in Oslo.
"I do not think it is particularly probable that Lufthansa would want to buy SAS when the situation is so shaky."
Traders said the SAS rise came after Bloomberg reported a "person familiar with the matter" as having said Lufthansa may announce takeover plans for SAS as early as the first half of 2011, pending talks with the governments.
Lufthansa, SAS and the Swedish and Norwegian governments declined to comment on the report.
Fund manager Christer Swaretz, head of Swaretz & Partner Fondkommission, said the share rise in SAS was exaggerated by tight liquidity. He also called the share reaction a dead cat bounce after the share's decline this year.
"We do not like SAS and we do not think there are grounds for this type of speculation. Now everyone seems to want to believe and hope, but we must look at the general direction and that is a downwards spiral for SAS," he added.
Lufthansa Chief Executive Wolfgang Mayrhuber said on October 28 that the carrier would hold off from major acquisitions until it had integrated and turned around recent buys. "There is nothing worth reporting at the moment," he said at the time.
Chairman Juergen Weber on November 2 signalled, though, that Lufthansa had not completely lost interest in buying SAS. "The takeover has not worked out so far, but let us wait and see."
Lufthansa went on a shopping spree last year that added Austrian Airlines, bmi, and Brussels Airlines to its stable, as it battles rivals British Airways BAY.L and Air France-KLM (AIRF.PA) for European pole position.
It said earlier this year it would focus on returning bmi to profitability before embarking on new major projects. (Reporting by Patrick Lannin and Helena Soderpalm in Stockholm, Maria Sheahan in Frankfurt, Blaise Robinson in Paris; Editing by Dan Lalor and Jon Loades-Carter)