Weak dollar prompts record foreign buyouts of U.S. companies


By Robert Weisman
The Boston Globe
Tuesday, October 2, 2007

BOSTON: European, Asian and Canadian companies are taking advantage of the weaker dollar to buy their U.S. counterparts at a record pace, increasing investment in the United States but also raising fears about a potential loss of jobs and autonomy.

"We could be looking at the world's largest tag sale if we continue to see declines in the dollar," said Donald Klepper-Smith, chief economist at DataCore Partners.

In the latest large deal aided by a weak dollar, Commerce Bancorp, which is based in Cherry Hill, New Jersey, agreed Tuesday to be acquired by Toronto-Dominion Bank of Canada in a cash-and-shares deal valued at $8.5 billion.

Nationally, the value of purchases of companies by non-U.S. buyers so far this year totaled $257.4 billion - more than in any full year since 2000, the height of the technology boom, according to Thomson Financial, a research firm in New York.

The buyouts are sparking anxiety in the United States, though their impact is complex. Foreign owners typically use acquisitions as an entry into the U.S. market and thus may be more willing than American buyers to invest in their new holdings, some economists say. But the risk is that they might also be quicker to cut back or consolidate U.S. operations when times get tough.

"Quite naturally, foreign companies want to play in this market," said Alan Tonelson, a research fellow at the U.S. Business and Industry Council, a trade group for small and midsize manufacturers. "They want leading-edge technology, and the United States is still the technology leader. But when they buy these companies, they're acquiring control over the most dynamic pieces of the American economy, and they're acquiring control over America's future."

Corporate deals are just one way the dollar's falling value is having an impact. The weaker dollar has also drawn European, Asian and Canadian tourists, made it more expensive for Americans to travel abroad, and bolstered the exports of U.S. companies that sell high-technology equipment or medical gear overseas. But foreign acquisitions could become the sagging dollar's most lasting legacy.

In New England, one of the regions heavily affected, 69 companies have been sold to foreign buyers in the first nine months of 2007 for a total of $30.8 billion - also a seven-year high.

In June, Philips Electronics of the Netherlands snapped up Color Kinetics, a maker of lighting systems, for $714 million. Last month, Analog Devices agreed to sell a pair of cellular product lines to MediaTek of Taiwan for $350 million. And last week, United Group of Australia completed a $411 million purchase of Unicco Service, which sells cleaning services for office buildings.

Some see the takeovers as inevitable in a global economy where geographic borders are no match for increasingly multinational companies.

"It's part of the overall global economic climate," said Brian Bethune, an economist for Global Insight, who said the acquisitions should be judged case by case. "Foreign companies are trying to get access to the U.S. market, and generally that's positive. European and Asian companies tend to take a longer view and could be more patient investors than U.S. hedge funds."

For now, many of the overseas buyers are promising to invest in their acquired properties. The new management team at Sabic Innovative Plastics, the former GE Plastics, plans to add 75 to 100 employees to its 425-person work force in New England.

"We're really lucky it wasn't bought by a Dow or a DuPont, because they might have moved the work from here to another one of their U.S. facilities," said Alfred Shogry, president of the Berkshire Central Labor Council in Pittsfield, Massachusetts.

A spokeswoman at Color Kinetics said, "Philips is looking at us to be their global research and development center for LED-based lighting fixtures," referring to the company's patented light-emitting diode technology. "We're absolutely hiring and growing right now."

But that is not always the case with foreign takeovers. The French telecommunications equipment maker Alcatel, which bought its U.S. rival, Lucent Technologies, last year, said last month that it would cut thousands of jobs. The outsourcing provider Caritor, which has corporate offices in California but almost all its employees and operations in India, recently said it planned to eliminate more than a quarter of the 350 jobs at the Boston headquarters of the technology services company Keane, which it purchased in June.

Klepper-Smith said he feared the effect of foreign deals on workers and communities if decisions on jobs and plant locations are made in Europe, Asia or the Middle East. "It raises some red flags and some real questions about our independence," he said.