Australian stocks: Shares up on M&A talk and Coles at record

Australian shares added 0.7 per cent on Friday as takeover target Coles Myer Ltd. set a new peak, but Insurance Australia Group Ltd. lost after a bigger-than-expected fall in annual profit.

The benchmark S&P/ASX 200 index rose 35.8 points to 5,023.6, based on the latest available data, falling 0.6 per cent on the week. It had scaled a six-week closing peak on Wednesday.

US private equity firm Bain Capital has joined a buyout group led by Kohlberg Kravis Roberts & Co. bidding for the Australia's second-biggest retailer, Coles, a source familiar with the transaction told Reuters.

"If these people get together, the likelihood of a bid occuring sooner rather than later is higher. And that is the catalyst today," said Tony Pearce, a portfolio manager with Legg Mason Asset Management, who helps manage about A$12 billion.

Coles shares rose 5.6 per cent to a new closing peak of A$13.80, making it the biggest contributor to the index's gains. Cole shares rose 2.6 per cent on the week, adding to last week's 21.2 per cent jump.

Stocks to watch

* A.B.C. Learning Centres Ltd., the nation's top childcare operator, rose 4 per cent to A$6.70 on expectations it would report strong earnings on Monday and flag robust growth this fiscal year on the back of recent acquisitions.

* Australian-listed Oxiana Resources Ltd. rose 4 per cent to A$2.85 after reporting a 14-fold rise in first-half profit.

* Caltex Australia Ltd., the country's only listed oil refiner and marketer, gained 1.2 per cent to A$23.78 on posting a 12.6 per cent rise in first-half profit and saying margins would remain robust for the rest of the year.

* Minara Resources Ltd. jumped 9.5 per cent to a four-and-half year closing peak of A$3.24 after its half-year profit soared to A$100.7 million, versus A$16.5 million a year ago. Minara was the top percentage gainer in the benchmark index.

* Insurance Australia Group, the country's biggest home and car insurer, fell 2.8 per cent to A$5.19 on reporting a bigger-than-expected fall in annual profit.

* Australian food group Goodman Fielder Ltd. added 2.5 per cent to A$2.07 after reporting an annual net profit that was 4.5 per cent above its prospectus forecast.

* The world's top miner, BHP Billiton Ltd./Plc. fell 0.4 per cent to A$27.40 and second-biggest miner, Rio Tinto Ltd./Plc. lost 0.3 per cent to A$72.90. Copper prices for September delivery were knocked down 3.7 per cent on Thursday following a drop in July home sales in the US

- REUTERS