(Adds details, quotes)
* TSX rises more than 1 percent as resources climb
* TransAlta soars after takeover offer
* Banks ease from early gains to end lower
By Leah Schnurr
TORONTO, July 21 (Reuters) - The Toronto Stock Exchange’s main index surged more than 1 percent on Monday, propelled by a takeover bid for TransAlta Corp (TA.TO), while resource issues climbed in tandem with commodity prices.
TransAlta was among the biggest gainers by weight after U.S. private equity firms LS Power Equity Partners and Global Infrastructure said they had approached the Canadian power-generation company with a nonbinding proposal to buy it for C$7.8 billion ($7.8 billion), or C$39 a share, a 21 percent premium over the stock’s closing price on Friday.
The big premium signaled strong interest in energy-related companies and came just four months after an affiliated investor dropped efforts to control the company’s board. Shares in TransAlta, which runs coal- and gas-fired power plants and renewable energy facilities in Canada and the United States, jumped C$4.86, or 15.1 percent, to C$37.11.
“It’s not the first time we’ve seen a little bit of an argument with that shareholder, so I think they decided to come back and try to skin it a different way,” said Brian Pow, vice president of research and equity analyst at Acumen Capital Partners, in Calgary.
“They still feel that it’s a pretty undervalued stock that should be privatized, in their mind.”
The S&P/TSX composite index .GSPTSE closed up 173.23 points, or 1.28 percent, at 13,689.19 with half of its 10 main sectors ending higher.
Resources helped spur the index higher as oil climbed amid worries of disruption to U.S. offshore oil and gas production as Tropical Storm Dolly entered the Gulf of Mexico. Gold prices were lifted by oil and a weaker U.S. dollar.
The energy and materials sectors rose 2.4 percent and 2.9 percent, respectively. Canadian Natural Resources (CNQ.TO) climbed C$3.43, or 4 percent, to C$89.43, while Agnico-Eagle Mines (AEM.TO) added C$1.51, or 2.2 percent, to C$71.83.
Gains in fertilizer companies Potash Corp of Saskatchewan POT.TO and Agrium Inc. AGU.TO also helped push the benchmark up. Potash rose C$11.83, or 5.6 percent, to C$222.99, while Agrium was up C$5.72, or 6.1 percent, at C$99.68.
The financial sector was higher for most of the session, lifted by better than expected results from Bank of America (BAC.N). But the sector retreated late in the day, closing down 0.2 percent.
The results eased anxiety over the credit crunch, which has hit financial markets hard, but analysts said that the underlying problems remain and are not likely to evaporate overnight.
“It depends on which side of the ledger you want to look at it from,” Pow said. “I think some people think that some of the stories are being painted a little bit better than they are.”
Market volume was 274 million shares worth C$6.1 billion. Advancers outpaced decliners 853 to 666. The blue chip S&P/TSX 60 index .TSE60 closed up 10.56 points, or 1.31 percent, at 819.39.
In New York, stocks were taken lower by the high price of oil and weak pharmaceutical shares. The Dow Jones industrial average .DJI closed down 29.23 points, or 0.25 percent, at 11,467.34, while the Nasdaq Composite Index .IXIC edged down 3.25 points, or 0.14 percent, to 2,279.53. ($1=$1.00 Canadian) (Reporting by Leah Schnurr; Editing by Peter Galloway)