By Danilo Masoni
MILAN (Reuters) - European shares hit their highest level in almost two weeks on Monday, boosted by gains among German utilities after the sector's leading players announced a major overhaul of the industry.
Innogy soared 12 percent after parent RWE and rival E.ON said they would break up Germany's largest energy company by market value and divide up its assets.
The deal would give E.ON greater economies of scale in power distribution and retail and RWE in renewables, making it easier for them to cope with Germany's rapid shift to cleaner energy sources. RWE and E.ON, whose share prices collapsed over the past decade, rose 7.5 and 5 percent respectively.
Morgan Stanley (NYSE:MS) said the agreement could be a win-win deal, with larger networks and retail businesses for E.ON and a long term renewables strategy and a stable dividend for RWE.
Shares in utilities in other countries rose on optimism for further M&A in the sector.
The STOXX utility index rose 1.4 percent to lead sectoral gainers in Europe, helping the pan-European STOXX 600 index rise by 0.3 percent by 0920 GMT to its highest since Feb. 28.
Germany's DAX was up 0.7 percent, while the UK's FTSE dipped 0.1 percent on weaker commodity stocks.
Among top gainers were GKN (LON:GKN), up 1.2 percent after Melrose increased its hostile bid for the UK automotive engineer, appealing to investors after the company struck a rival deal of its own last week. Melrose fell 2.4 percent.
The autos sector index rose 0.6 percent, brushing off a tweet by U.S. President Donald Trump in which he threatened to impose taxes on European autos imported into the U.S. if the EU retaliates in a row over steel tariffs.
https://goo.gl/oJ2PBs
The top faller on the STOXX was Just Eat , down 4.3 percent, following a downgrade to "sell" from Deutsche Bank (DE:DBKGn).
"Along with 2017 results, new CEO Peter Plumb announced an investment plan to expand into the delivery services business. While we think this move is strategic to defend Just Eat's leadership position against increased competition, it will come
at the expense of profitability," Deutsche Bank said.
Shares in Aryzta's fell 3.8 percent as the Bakery company announced another management shuffle after posting a wider first half net loss.
Meanwhile, basic resources stocks fell 0.7 percent, tracking lower metal and crude oil prices.