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07-31-2008, 08:04 AM
U.S. companies vulnerable to foreign buyers


By Jessica Hall

PHILADELPHIA (Reuters) - With a record volume of international takeovers of U.S. companies, it almost appears America itself is up for sale.

The weak dollar and slumping stock prices of U.S. companies has created a window of opportunity for international buyers to snatch up American icons such as beer brewer Anheuser-Busch Cos Inc (BUD.N: Quote, Profile, Research, Stock Buzz) 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 U.S. 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 second quarter, acquisitions of U.S. companies by international buyers totaled $124.3 billion, marking the highest total for any second quarter on record and jumping 23 percent over the year-earlier quarter, according to research firm Dealogic.

International takeovers represented 22 percent of all U.S. merger activity in the first half of the year, up from 17 percent in the first half of 2007, according to research firm Dealogic.

InBev NV's (INTB.BR: Quote, Profile, Research, Stock Buzz) deal to acquire Anheuser-Busch for $52 billion gave Belgium the distinction of being the most active foreign buyer of U.S. 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 U.S. company in history, following Vodafone Group Plc's (VOD.L: Quote, Profile, Research, Stock Buzz) $60.3 billion acquisition of AirTouch Communications in 1999, according to Thomson Reuters.

Other U.S. assets recently falling into international hands include Barr Pharmaceuticals Inc (BRL.N: Quote, Profile, Research, Stock Buzz), which agreed to be acquired by Israel's Teva Pharmaceutical Industries Ltd (TEVA.O: Quote, Profile, Research, Stock Buzz) (TEVA.TA: Quote, Profile, Research, Stock Buzz), the world's largest generic drug company, for $7.46 billion; and eye care company Alcon Inc (ACL.N: Quote, Profile, Research, Stock Buzz) which is being bought by Switzerland's Novartis AG (NOVN.VX: Quote, Profile, Research, Stock Buzz) for about $27.7 billion.

Earlier this month, Swiss drugmaker Roche AG (ROG.VX: Quote, Profile, Research, Stock Buzz) made a bid to acquire the shares of its U.S. partner Genentech Inc (DNA.N: Quote, Profile, Research, Stock Buzz) 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.

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 U.S. 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 U.S. 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 U.S. takeovers as an anomaly, Sohn said the 13-percent 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.