The FTSE 100, Britain’s top share index , rose after the $160 billion deal between Viagra-maker Pfizer and Botox-producing Allergan collapsed.
The index was up 0.6 per cent or 34.76 points at 6,133, with pharmaceutical companies Shire and AstraZeneca at the top of the leader board, up by 3.2 per cent and 2.9 per cent respectively.
Speculations that Pfizer will look for another partner in its quest to lower its tax burden have sent shares of pharmaceutical firm flying, according to investors.
"The possibility now is that Pfizer goes shopping again, and you might be prepared to develop a case that maybe a firm like Shire becomes the bid target," said Chris Beauchamp, market analyst at IG.
"The implications of the new rules would have to be worked out, but if you've got cash sloshing around the sector, people are wondering who will benefit," Beauchamp added.
The decision to end the $160 billion (£113bn) merger, the biggest pharmaceutical deal in history, comes two days after the US Treasury announced fresh plans to prevent deals known as “inversions”, where a US firm merges with a company in a country with a lower tax rate.
Pfizer said it would pay Botox-maker Allergan $150 million “for reimbursement of expenses associated with the transaction”.
The deal would have been the biggest 'inversion' ever attempted and would have seen Pfizer domiciling to Ireland, where Allergan is registered.
Additional reporting by Reuters
