French Seeking US Buyout Bargains
THE French are coming! The French are coming! French investors, that is. The Japanese get a lot of media attention with their takeovers of American companies. But French businesses are also increasingly eager to buy United States companies, or enter into financial linkages with them, says Elsa Berry. Ms. Berry is executive vice president of BANEXI International, the merger-and-acquisition arm in New York for Banque Nationale de Paris. BNP is the largest bank in France, and one of the largest in Europe, with $230 billion in assets. It is also the main underwriter of French securities.
In terms of direct investment, the British, not the Japanese, have the largest presence in the US - valued at about $120 billion, compared to about $73 billion for the No. 2 Japanese. The French are a mere seventh or so on the roster, Berry says.
Direct French investment in the US was about $16.4 billion at the end of 1989, the US Commerce Department says.
But as Ms. Berry quickly points out, the French are intensifying their US acquisition activity, in part because of a feeling that they are ``late'' in gaining entry to the US. Indeed, France was No. 1 last year in terms of the percentage increase in direct investment in the US, a Commerce Department official says.
The current dollar-franc relationship helps, Berry says. When the dollar is weak, as is now the case, foreign buyouts of US companies become less costly. Further, given today's low stock prices, many US companies are now undervalued. Bernarda Blasco, an official with the French consulate in Washington, cites several reasons for the increasing French interest in the US. In recent years, she says, French companies have become more global in their outlook - looking to markets not just at home, or in Europe, but abroad. Many French firms have been undergoing management reorganization, which means that subsidiaries are freer to enter into overseas relationships. Moreover, she says, the US is seen as a very ``safe'' market, in terms of long-range investment.
For the first three quarters of this year, there were some 23 acquisitions in the US involving French buyers, valued at more than $6 billion, says Jay Singh, an associate with W.T. Grimm, Chicago, a division of Merrill Lynch. (Not all of the purchase prices are necessarily stated.) By contrast, there have been some 52 transactions involving British companies during this period, with a total value above $7 billion. In other words, says Mr. Singh, the French have been nearly holding their own with the first-place British in terms of value.
During 1989, BNP's merchant banking group assisted a total of 79 clients worldwide in successfully closing acquisition-related transactions. In the US, BANEXI International was involved in the purchase of Burndy Corporation (traded on the New York Stock Exchange) by Framatome SA; the purchase of New Methods Research, by Digital Design SA, and Source Perrier SA's sale of its US dairy distribution assets to the Irish Dairy Board.
BANEXI International, says Ms. Berry, is interested in US firms with a minimum value of between $10 and $15 million, and a maximum of $400 million. It is not talking about politically-sensitive megadeals like Matsushita's purchase of MCA.
Berry, French-raised but with US citizenship, wrote her Masters thesis several years ago on the topic ``of how French companies could acquire US firms.''
Are such transatlantic takeovers somehow ``unpatriotic''? Not at all, she laughs. She finds them ``mutually beneficial.'' BANEXI avoids hostile takeovers, as well as transactions involving US companies in bankruptcy proceedings; the French have a strong cultural dislike of default. US firms are able to obtain access to a line of bank capital that they might not otherwise obtain in the current tight capital market in the US, Berry notes. The French firms, she says, obtain access to the US consumer market, as well as Canada, thanks to the new US-Canada free trade agreement.
The US firms, meanwhile, gain access to France, and thus, the other 11 members of the European Community, as that group of nations prepares for economic integration in 1992.