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Rise in British American Tobacco shares supports FTSE 100
October 21, 2016 / 9:35 AM / in a year

Rise in British American Tobacco shares supports FTSE 100

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* FTSE 100 flat

* British American Tobacco rises after Reynolds offer

* Informa gains after upgrade

* Acacia Mining soars following results

By Kit Rees

LONDON, Oct 21 (Reuters) - UK shares steadied on Friday, boosted by British American Tobacco after it bid for U.S. rival Reynolds American, while profit warnings from mid-sized companies added a note of caution before earnings season picks up next week.

The blue chip FTSE 100 index was flat at 7,028.53 points by 0906 GMT, on course to post a 0.2 percent gain in a week that saw some big fallers following disappointing updates from Pearson and Burberry and a profit warning from Travis Perkins.

The FTSE 250 mid cap index, made up of more domestically-focused firms, was also flat and on track to end the week with a 0.2 percent fall, hit by profit warnings on Thursday from engineering firms Keller and Senior , as well as a slump in cyber security company NNC .

On Friday, M&A activity boosted shares in standout performer British American Tobacco, which rose nearly 3 percent and hit a two-week high after offering to buy Reynolds American Inc.

“It has been a bit of a mixed bag,” Laith Khalaf, senior analyst at Hargreaves Lansdown, said.

“That’s what you get when you’ve had the currency fluctuating, which has created a bit of a division in terms of who is doing well out of that, and you’ve also got a very ...low-growth world, which some companies can prosper in and others can‘t.”

British American Tobacco’s proposed $47 billion deal with Reynolds American would create the U.S. market leader. Shares in peer Imperial Brands rose 2 percent.

“The U.S. is one of the most attractive profit pools in the world,” Owen Bennett, equity analyst at Jefferies said in a note.

“Macros are supportive, pricing potential is significant ... and also a large margin opportunity still. Litigation risk is now largely behind us also. The U.S. will now make up over 40 percent of BAT profit versus just under 20 percent previously.”

Publishing and events company Informa was also among the top gainers, up 2.2 percent following an upgrade from Berenberg to “buy” from “hold”.

Late on Thursday the firm said that it had received U.S. antitrust clearance for its 1.2 billion pound acquisition of Penton.

Analysts at Berenberg also noted its 2014 acquisition of Hanley Wood Exhibitions. “We believe Informa’s strategy of portfolio improvement has delivered greater progress than investors give it credit for,” they said in a note.

Outside of the blue chips, well-received results buoyed shares in Acacia Mining, which soared 11.6 percent after the precious metals miner said that it saw its full year gold production ahead of forecasts.

“The strong operational and financial results represent another significant step forward for Acacia, particularly considering some of the headwinds experienced during the quarter,” Russ Mould, investment director at AJ Bell, said in a note. (Reporting by Kit Rees; editing by John Stonestreet)

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