STOCKS NEWS EUROPE-Renault, Eni, BASF potential M&A targets -Citi

Following the recent wave of mergers and acquisitions activity, Citi strategists unveil a list of potential takeover targets in Europe, based on a screening using the level of profits generated by the targets.

"There are three catalysts to the recent increase in activity. Two have been in place for some time: valuation and funding. The third has only recently emerged: confidence," Citi strategists write in a note.

"We screen for companies that generate enough pre-tax earnings such that an acquirer, if borrowing the entire equity market capitalisation of the target firm, could use the target company's existing pretax, after interest earnings stream to fund the interest cost of that new debt."

While most deals are not exclusively debt funded, the strategists say focusing on the potential funding is "a good starting point to whittle an investable universe down to a sub-set of possible targets."

Among the top European targets on Citi's list feature Eni (NYSE: E - news) , Royal Dutch Shell, Rio Tinto (Xetra: 855018 - news) , AP Moller Maersk, BMW (Berlin: BMW.BE - news) , Michelin (Berlin: MCH.BE - news) , Renault (TLO: RENA-U.TI - news) , BASF and Safran (Munich: SEJ1.MU - news) .

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