New York: Foreign investors exploited the declining US dollar during the past three months to snap up American companies, taking the biggest share of US deals in at least a decade.
Buyers from Dubai to the Netherlands accounted for 46% of the $230.5 billion (Rs9.05 trillion) of US mergers and acquisitions (M&A) 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 West Asia in US 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 of 2007. Foreign acquirers, who stepped in as the dollar fell 10% 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 $1.49 per euro on 23 November—the lowest since the euro’s introduction in 1999. Analysts expect it to rise to $1.40 against the euro in the next year.
“With the dollar being valued the way it presently is, basic economics should lead us to expect continued strong foreign investment in the US,” said Frederick Green, co-head of US M&A at New York-based Weil, Gotshal and 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 Chocalatier Inc. from Camden, New Jersey-based Campbell Soup Co. for $850 million.
JPMorgan Chase and Co. worked on $36.4 billion of foreign takeovers in the US, 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.
Non-US buyers last year avoided the political controversy that plagued Dubai-owned DP World in 2006, when it added six US port terminals with the purchase of London-based Peninsular and Oriental Steam Navigation Co. US 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-DP World (landscape), you’ve had two years that turned out to be record years for US foreign investment,” said Ivan Schlager, a partner at Skadden, Arps, Slate, Meagher and Flom Llp. in Washington, DC. “It really dispels the idea that the US was turning inward. 2008 will shape up to be probably an even bigger year.”