* EDF gains, reaches deal on renewables tax
* Saint-Gobain climbs on stake sale news
* Swatch shares up, buys Harry Winston jewellery arm
By Tricia Wright
LONDON, Jan 14 (Reuters) - European shares were flat on Monday, steadying after a recent strong run, with French energy firm EDF the top gainer after it reached a deal with the government over a tax levy shortfall.
The FTSEurofirst 300 was trading at 1,163.15 points by 1218 GMT, just shy of a two-year high after gaining almost 3 percent during 2013, led on Monday by a 5.1 percent rise from EDF.
Comments from a top Federal Reserve official about the outlook for the U.S. economy proved supportive to sentiment.
Chicago Fed President Charles Evans said the U.S. central bank's decision last year to tie monetary policy to specific economic conditions should help boost the recovery without letting inflation take hold.
Sentiment could also be driven by a speech later in the day from Fed Chairman Ben Bernanke, with markets looking for any further indications of how long the central bank's latest bond- buying programme will last.
Merger and acquisition activity played a part in supporting European shares on Monday, in a trend which some strategists reckon is set to continue.
Saint-Gobain rose 2.4 percent, reversing recent losses, after the group said it has received a $1.7 billion offer from Ireland's Ardagh Group for the North American business of its Verallia unit.
"This is very positive, as the price tag represents 30 percent of the total EBITDA (earnings before interest, taxes, depreciation and amortisation) of Verallia, implying that the same multiples for the rest of the business would value the whole Verallia at 4.3 billion euros, way above the estimates when Saint-Gobain was planning to list 40 percent of the business," a Paris-based trader said.
Swiss luxury firm Swatch Group, meanwhile, added 2.9 percent, buoyed by news it is buying the luxury jewellery arm of Canada's Harry Winston in a $750 million cash deal to expand into high-end bracelets, rings and necklaces.
"I think M&A activity will continue to be a driver of markets during the course of 2013," Henk Potts, market strategist at Barclays, said.
"The reality is companies I think will find it hard to grow organically. Companies are awash with cash and I think they're quite willing to spend that money."
But European postal service operators were under pressure after United Parcel Service Inc said it would drop its 5.2 billion euro ($7 billion) bid for peer TNT Express on the expectation of a European Commission veto.
Shares in the Dutch delivery firm plunged almost 42 percent.
The euro zone's blue-chip Euro STOXX 50 rose 0.2 percent to 2,723.77, having hit a fresh five and a half month high in earlier trade on Monday.