The British keep up brisk pace in US business takeovers
Traditions -- people don't talk much about them, they just follow them. The British don't make a big deal about investing in the United States -- they just do it. And through almost all of this country's existence they've been investing here.
But last month a few loud voices were heard from across the Atlantic. They came from Grand Metropolitan Ltd. and Midland Bank, both based in London. Within two weeks of each other, they latched on to major US acquisitions. Grand Metropolitan, an old hand at international investments in the leisure industry and consumer products, bought Pan Am's Intercontinental Hotels -- a $500 million-purchase. The offer seemed to come out of the blue.
Midland Bank, one of London's "big four" clearing banks and the only one that didn't have a fistful of investments in the US, finally heard those golden words of acquisition approval from the Federal Reserve Board. The OK cleared the bank's plans to buy 51 percent of Crocker National Corporation's voting shares. The main business of the corporation is Crocker National Bank, in California.
That acquisition cost Midland $820 million, and moved it from 15th to 10th place among the world's largest banking organizations. Reportedly, it was also the largest foreign banking takeover on record in the US.
With a little jog of the memory, the rumblings of other large British companies can be recalled as they recently made their way along the road of acquisitions: Standard Oil Company (Ohio), 53 percent owned by British Petroleum , buying up Kennecott Corporation, the largest US copper producer, earlier this year; Imperial Group buying Howard Johnson's in 1979; and last year's takeover of Marine Midland Banks Inc. of Buffalo by Hong Kong & Shanghai Bank-ing Company of London.
At the British Embassy, Neville Date, first secretary of trade promotion, calls British investment in the US "a natural evolutionary sequence." With common language, common corporate practices, and common markets, it is continually growing, he says.
The Department of the Treasury has kept track of this growth. In 1980 Britain invested $11.34 billion in the US -- 17 percent of total foreign investment. In 1979 British investment was $9.79 billion -- 18 percent of total foreign investment. Last year the British ranked second in US investments only to the Netherlands. (Many Dutch investments in the US, however, are through holding companies only.) These figures just cover investment money coming directly from the foreign parent.
Greg Fouch, with the US Department of Commerce's Survey of Current Business, says manufacturing is where Britain's "real muscle is." Last year the British poured $4.27 billion into US industry. And in the first half of this year, they have chalked up 38 new entries. Of these, 30 were acquisitions.
David Bauer, director of a foreign investment survey done by the Conference Board in New York, reasons that it's only natural for acquisitions to outweight start-ups. "The British have been doing business with us for so long. Acquisitions require a lot of analysis for firms not active in the US, but the British don't have any trouble with it."
With the Midland Bank takeover, the spotlight has shifted even more to banking. John O'Kane, vice-president for London's Barclays International Bank in Boston, uses the Midland Bank case to emphasize the increasing role of British banks in the US. "As US banking goes more national, and it will, many US banks will welcome help from international banks. Crocker recognizes this. Crocker was really a secondtier bank before Midland came along and paid more than book value for its shares."
Midland Bank, Mr. O'Kane says, had its own reasons: "to diversify itself and get a good share of the US market. . . . No bank wants heavy assets in the United Kingdom right now because it's just not the stronger economy in the world."
How do Americans view the growth of British investment? Mostly, very well. In fact, many US cities are eager to get foreign investment into their areas and keep in close touch with branches of the British Trade Development Office in New York for information about which British companies want to invest in what state.
But others aren't so happy, and Congress is the place where these opposing views come face to face.
Probably the unhappiest industry is mining. It is not irritated by the British specifically; its complaints are directed at foreign acquisitions in general.
The industry's argument is twofold. It doesn't want precious, scarce, or strategic resources being siphoned off overseas where Americans can't use them. Second, many resent "big giants getting into a balanced industry just to buy and not necessarily to increase exploration," one mining official said.
HR 4186, a bill being pushed by the Subcommittee on Mines and Mining, would place a nine-month moratorium on any foreign investment exceeding 5 percent in a US mining industry. The second part of the bill requires the Department of Interior to make a study of foreign activity to see if it is harmful to the US mining industry.
Another bill, already passed by the House, would take domestic laws on borrowing and make them applicable to foreign investors. At present, if an American bank wants to take over another American bank, half of the investment money has to be put up by that investing bank. In other words, it cannot invest with completely borrowed money.
"Certainly S 1436 [the bill] stemmed from a rash of foreign takeover attempts , but it's meant to put foreigners on complete and equal terms with US investors ," says John Daniels, counsel to the Senate Banking Committee.
Last year Congress passed a four-month moratorium on foreign acquisitions of US banks. During that time the Fed. General Accounting Office, and Controller of the Currency studied the state of foreign bank takeovers in the US. Both the Fed and General Accounting said the situation was not harmful to US banking. The Controller of the Currency disagreed.
Speaking of S 1436, a spokesman from the Treasury Office of International Investment says, "From what I've noticed, in most cases the British don't take out huge loans to invest, so it [the bill] wouldn't affect them."