Nestle, Italian bank deal prop up European shares

* STOXX up 0.4 pct at close

* Banks rise as Italy solves Veneto banks crisis

* Nestle rallies as activist investor urges changes

* German business confidence rises to record

* Oil bounce also supports market
(Adds detail, updates prices at close)

By Danilo Masoni and Kit Rees

LONDON, June 26 (Reuters) – European shares rose on Monday
as banks rallied after Italy reached a deal to wind up two
failed regional banks and Nestle climbed to a new record after
an activist investor urged changes at the consumer bellwether.

Italy began winding up two failed Veneto region banks on
Sunday in a deal that could cost taxpayers up to 17 billion
euros but puts an end to a long-running crisis and leaves the
lenders’ good assets in the hands of Intesa Sanpaolo.

“The announcement of definitive steps to resolve the two
Veneto banks should be seen as a positive for Italian banks and
the broader sector (albeit at a high cost),” said Jefferies
analyst Benjie Creelan-Sandford.

“Intesa, as acquirer of the ‘good’ assets, also looks to be
getting a good deal,” he added.

Shares in Intesa, Italy’s largest retail bank, rose 3.5
percent while the euro zone bank index rose 1.1 percent.

Gains in bank stocks helped the pan-European STOXX 600
and the euro zone blue chip indexes end 0.4
and 0.5 percent higher respectively, while the UK’s FTSE
added 0.3 percent.

Further supporting sentiment was a survey showing that
German business confidence unexpectedly rose in June to a record
high, a fresh sign that company executives are more upbeat about
the growth outlook of Europe’s largest economy.

The German blue chip index gained 0.3 percent.

Nestle led STOXX gainers, up 4.3 percent. Activist
investor Daniel Loeb’s Third Point unveiled a stake of more than
1 percent, urging the group to improve its margins, buy back
stock and sell its stake in L’Oreal.

UBS said that despite its scale, Nestle lagged its rivals in
profitability and that the move could put pressure on its CEO to
take tangible steps to accelerate value creation. L’Oreal rose
around 4 percent.

Gains in Nestle also gave a lift to sector peers such as
Danone and Diageo, sending the European food
and beverage index up 2 percent.

Higher oil prices propped up the energy sector, the worst
performing this year, though the sector gave up earlier gains to
end broadly flat as oil prices steadied.

European tech stocks came under pressure, however,
down 0.5 percent following a 3.7 percent fall in Dialog
Semiconductor, which dropped after a media report
cited comments from the chipmaker’s CEO that the group is
looking for larger acquisitions to reduce its reliance on Apple.

William Hill was another sizeable faller, down 4.4
percent following a downbeat broker note.

(Reporting by Danilo Masoni and Kit Rees; Editing by Toby
Chopra)

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