Foreign Companies Bought U.S. Firms Freely When Greenback FellTwo pressure points on the market have eased up markedly in recent days. The price of crude oil is falling, while the dollar is strengthening.
Life, theoretically, should be good. But a strengthening dollar, should it continue, could cast a shadow on one of the few bright spots for Wall Street investment banks: international bids for U.S. companies. That is because the weak dollar emboldened many foreign acquirers to make offers they might have been sitting on for years.
Consider InBev NV's $52 billion bid for Anheuser-Busch Cos. -- and the Belgian brewer's jump to $70 a share from the initial per-share offer of $65. It was spurred partly by the falling value of the dollar. When the bid was made, the currency was at 62 cents to the euro, valuing the offer at about €43 a share. With the dollar now at 67 cents, the per-share price has increased to €46.97.
Many have bemoaned the sale of U.S. companies to foreign rivals. Still, for investors in U.S. companies, a takeover offer has been a quick way to realize value for their shares in a tough market, often after years of holding on.
It is possible that many potential foreign acquirers will rush to make bids for U.S. assets now. Offers are likely to be less generous than they would have seemed if the dollar were stuck in its downward spiral.
By: Heidi Moore
Wall Street Journal; August 12, 2008
