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US companies vulnerable to foreign buyers

Deals

With a record volume of international takeovers of US companies, it almost appears America itself is up for sale.

The weak dollar and slumping stock prices of US companies has created a window of opportunity for international buyers to snatch up American icons such as beer brewer Anheuser-Busch Cos Inc and the landmark Chrysler Building in New York. “The dollar has depreciated so much that America is on the sale rack,” said Sung Won Sohn, a professor of economics at California State University. “America has such an appetite for foreign goods -- Chinese imports and oil -- that US dollars have gone overseas.

Now, many Americans aren’t happy that foreign companies are buying pieces of America with the money we gave them in the first place,” Sohn said. In the Q2, acquisitions of US companies by international buyers totaled $124.3 billion, marking the highest total for any Q2 on record and jumping 23% over the year-earlier quarter, according to research firm Dealogic. International takeovers represented 22% of all US merger activity in the H1 of the year, up from 17% in the H1 of 2007, according to research firm Dealogic.

InBev NV’s deal to acquire Anheuser-Busch for $52 billion gave Belgium the distinction of being the most active foreign buyer of US assets in the first half of this year, followed by Spain and Canada, Dealogic said. The Anheuser-Busch deal ranked as the second-biggest cross-border acquisition of a US company in history, following Vodafone Group Plc’s $60.3 billion acquisition of AirTouch Communications in 1999, according to Thomson Reuters.

Other US assets recently falling into international hands include Barr Pharmaceuticals Inc, which agreed to be acquired by Israel’s Teva Pharmaceutical Industries Ltd, the world’s largest generic drug company, for $7.46 billion; and eye care company Alcon Inc which is being bought by Switzerland’s Novartis AG for about $27.7 billion. Earlier this month, Swiss drugmaker Roche AG made a bid to acquire the shares of its US partner Genentech Inc it does not already own for $43.7 billion. Even the Pennsylvania Turnpike awarded long-term leasing rights to a Spanish-led investor group for $12.8 billion.

 
MORE THAN JUST A WEAK DOLLAR

Although some investment bankers and analyst pin the spike in cross-border activity to the weak dollar, others contend that strategy and the desire to expand globally were the motivators behind many of these recent corporate deals. “Strategic buyers don’t wake up in the morning and say: ‘This currency is cheap. I’m going to go do a deal.’ They do a deal because it’s strategic and makes sense,” said Herald Ritch, president and co-chief executive officer of investment bank Sagent Advisers. “There’s no question that, on the margin, currency levels tend to influence decisions, but strategic deals get done because they fit a company’s strategy,” Ritch said.

European companies have been the most active buyers of US assets, with 314 deals so far this year, compared with 117 deals by Asian acquirers, and 33 by African and Middle Eastern buyers, according to Thomson Reuters. “Europe and the US dominate deal activity globally, so it makes sense that deals between those areas would predominate,” Ritch said.

Although some investment bankers view the second quarter’s record pace of US takeovers as an anomaly, Sohn said the 13% depreciation of the dollar against major currencies over the past 18 months should fuel more acquisitions. “There are trillions of dollars overseas that have to be put to work. This is just the tip of the iceberg,” Sohn said. (Reuters)

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