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03 June 2014

Transatlantic takeovers 

Bids from US groups to acquire a British pharmaceutical giant and a French energy company showcase the political and regulatory complexity of transatlantic deals, especially when the companies are perceived as “national champions.” But sometimes the outcome defies the stereotype.

Late last month, US pharmaceutical giant Pfizer saw its final offer to buy a smaller rival, AstraZeneca, rejected by the UK company’s board. AstraZeneca believes the drugs in its development pipeline make the company considerably more valuable than Pfizer’s offer.

Under UK takeover rules, Pfizer’s offer was required to be “take-it-or-leave-it” and completed within a prescribed timeframe, complicating negotiations for a deal that would meet expectations for both companies and their shareholders.

Pfizer CEO Ian Read argues that the rules are too complex and bureaucratic, although he ultimately concluded that the deal fell through because of disagreement on the potential value of AstraZeneca’s drugs in development.

Meanwhile, the French government is closely involved in the bid by US conglomerate General Electric to buy the energy business of Alstom, one of France’s largest industrial companies.

Initially the government encouraged Germany’s Siemens to make a more “European” alternative bid, but GE CEO Jeffrey Immelt took the unusual step of directly addressing France’s National Assembly, attempting to reassure legislators that the deal would be as good for France as for GE.

That move seems to have melted some of the opposition from French leaders. Although the deal is still in play, it is premature to conclude that France will automatically favor national or European prestige over economic common sense.

Government and corporate leaders in every country are often tempted to treat foreign bidders as “barbarians at the gate,” but international mergers can be a civilizing force as well as a generator of innovation (and jobs) in an increasingly globalized world.