11/17/2014 08:27 EST | Updated 01/17/2015 05:59 EST

TSX adds to gains amid major dealmaking in drug, mining, oilfield sectors

TORONTO - The Toronto stock market closed with a modest advance Monday with gains spread out across almost all sectors despite disappointing economic news from the world's third-largest economy.

The S&P/TSX composite index added to last week's one per cent advance, up 39.4 points to 14,882.5 as Japan's economy unexpectedly slipped back into recession in the third quarter, contracting at a 1.6 per cent annual pace following a sales tax hike.

But traders preferred to concentrate on the positive, including a wave of merger and acquisition activity.

American Botox maker Allergan reached a friendly deal to be acquired by Irish drug company Actavis in a deal valued at US$66 billion, which trumps a hostile offer by Quebec-based Valeant Pharmaceuticals (TSX:VRX). Allergan shareholders will receive about US$219 in cash and stock.

Valeant’s most recent bid was valued at US$53 billion and the company said Monday it couldn't justify matching the Actavis offer. Valeant shares rose $2.93 to $154.40.

Analysts note that conditions — particularly inexpensive financing — are currently very favourable for M&A activity.

"Money is cheap, growth opportunities inside of a relatively slow growth economic environment are a little harder to come by and so we’re seeing companies pursue growth opportunities outside of the organic kind," said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.

Osisko Gold Royalties Ltd. (TSX:OR) and Virginia Mines Inc. (TSX:VGQ) plan to combine their businesses to create a royalty company with revenue from two Quebec operating gold mines. The friendly deal values Virginia Mines of Quebec City at about $479 million, about 41 per cent above its closing stock price on Friday. Osisko shares slipped 56 cents to $14.86 while Virginia Mines jumped 35.65 per cent to $13.66.

Also, two of the world's biggest oilfield services companies are combining. Halliburton will buy Baker Hughes in a deal worth more US$34.6 billion.

The Canadian dollar fell back 0.15 of a cent to 88.53 cents US.

U.S. indexes were mixed as the Dow Jones industrials gained 13.01 points to 17,647.75, the Nasdaq was 17.54 points lower at 4,671 and the S&P 500 index advanced 1.5 points at 2,041.32.

Reaction was muted to the Japanese data since the country has been afflicted with stagnation for the past two decades.

"Not shock, I would just call it disappointment to some degree," Fehr said.

The gold sector was the leading percentage advancer on the Toronto market, up about 1.85 per cent even as December gold ticked $2.10 lower to US$1,184 an ounce.

The base metals component was ahead 0.3 per cent while December copper was a cent lower at US$3.04.

Telecoms were also supportive, ahead 1.4 per cent with additional strong lift coming from the industrials and consumer staples sectors.

The TSX energy sector was the major decliner, down 0.65 per cent as the December contract in New York was down 18 cents to US$75.64. Concerns about demand and global oversupply last week pushed crude to below US$75 for the first time in four years.

Also, the Republican-controlled U.S. House of Representatives passed legislation in favour of building TransCanada's (TSX:TRP) Keystone XL pipeline on Friday. And supporters in the Democratic-run Senate predicted they will get the 60 votes needed to pass it this week. However, President Barack Obama could veto the bill and it is highly uncertain if the Senate or House would have the two-thirds majorities that would be needed to override a veto. TransCanada was up 77 cents to C$56.57.