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 Business News | January 2008 
Americans Sold Out to Foreign Firms at Record Rate
 Zachary R. Mider - Bloomberg
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 |  | In 2006 and the first half of 2007, it was cheap financing that allowed private equity firms to compete. Now, foreign corporates with strong currencies dominate.
Lee Lebrun, UBS AG |  | |
Foreign investors exploited the declining U.S. dollar during the past three months to snap up American companies, taking the biggest share of U.S. deals in at least a decade.
Buyers from Dubai to the Netherlands accounted for 46 percent of the $230.5 billion of U.S. mergers and acquisitions announced in the fourth quarter, the largest portion since 1998 when Bloomberg started compiling the data. The total excludes $17.9 billion of so-called passive investments by state-run funds in Asia and the Middle East in U.S. banks, including New York-based Citigroup Inc.
The influx of overseas buyers cushioned a drop in domestic deals, as tighter credit markets ended the leveraged buyout boom that spurred record-setting takeovers in the first half 2007. Foreign acquirers, who stepped in as the dollar fell 10 percent against the euro last year, show no sign of losing interest, according to bankers and lawyers.
"In 2006 and the first half of 2007, it was cheap financing that allowed private equity firms to compete," said Lee Lebrun, head of M&A for the Americas at Zurich-based UBS AG. Now, "foreign corporates with strong currencies dominate," he said.
The dollar declined to $1.4967 per euro on Nov. 23, the lowest since the euro's introduction in 1999, and traded at $1.4726 at 4:21 p.m. in New York yesterday. Analysts expect it to rise to $1.40 against the euro in the next year.
Turkish Chocolate
"With the dollar being valued the way it presently is, basic economics should lead us to expect continued strong foreign investment in the U.S.," said Frederick Green, co-head of U.S. M&A at New York-based Weil, Gotshal & Manges LLP.
The quarter's biggest transactions included Toronto- Dominion Bank's takeover of Commerce Bancorp Inc., based in New Jersey, for $8.5 billion, and the $8.1 billion purchase of Chicago-based Navteq Corp. by Finland's Nokia Oyj, the world's biggest maker of mobile phones. Weil Gotshal counseled Turkey's Yildiz Holding AS when it agreed to buy chocolate maker Godiva from Camden, New Jersey-based Campbell Soup Co. for $850 million.
JPMorgan Chase & Co. worked on $36.4 billion of foreign takeovers in the U.S., the most in the fourth quarter, followed by Goldman Sachs Group Inc., with $35.3 billion, according to Bloomberg data. JPMorgan represented Toronto-Dominion and Goldman advised for Commerce Bancorp.
Security Clearance
Non-U.S. buyers last year avoided the political controversy that plagued Dubai-owned DP World in 2006, when it added six U.S. port terminals with the purchase of London-based Peninsular & Oriental Steam Navigation Co. U.S. lawmakers, including New York Democratic Senator Charles Schumer, said Dubai's ownership of the port operations could threaten national security, forcing DP World to sell them to American International Group Inc.
"In a post-Dubai Ports world, you've had two years that turned out to be record years for U.S. foreign investment," said Ivan Schlager, a partner at Skadden, Arps, Slate, Meagher & Flom in Washington. "It really dispels the idea that the U.S. was turning inward. 2008 will shape up to be probably an even bigger year."
Schlager is advising Nasdaq Stock Market Inc. in a transaction that will result in Borse Dubai owning a minority stake in the electronic exchange. It won approval this week from the Committee on Foreign Investment in the U.S., which reviews purchases on national-security grounds.
Citigroup, Morgan Stanley
Foreign companies were the buyers in $105.3 billion of the $230.5 billion of U.S. purchases in the quarter, Bloomberg data show. Overseas acquirers have accounted for just 18 percent of U.S. deals per year on average since 1998.
Some of the biggest U.S. merger advisers have themselves turned to foreign investors during the past three months to shore up capital depleted by losses on subprime home loans.
Citigroup, the biggest U.S. bank, raised $7.5 billion from Abu Dhabi's sovereign wealth fund. Firms controlled by China invested $5 billion in Morgan Stanley and $1 billion in Bear Stearns Cos., and Merrill Lynch & Co. got $4.4 billion from Singapore's government-run fund, Temasek Holdings.
To contact the reporter on this story: Zachary R. Mider in New York at zmider1(at)bloomberg.net |
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