| BUSINESSWEEK ONLINE : JANUARY 25, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- INTERNATIONAL COVER STORY
Mmm, Taste That Merger Money (int'l edition) Nothing excites an investment banker more than a struggling industry with lots of overcapacity. By that measure, the auto industry comes near the top of the list. With only a handful of the world's 40 auto makers posting strong profits and the world's big six packing more than $100 billion in cash, the motor industry looks like an investment banker's dream. Indeed, bankers smell big bucks in cars. ''Believe it or not, we get 5 to 10 [bank] proposals a week,'' says an executive at Volvo, the subject of the hottest takeover rumors these days. Bankers are hoping that the long-awaited consolidation of auto makers is finally going to happen. Despite the undeniable logic, there have been relatively few auto deals in recent years. But last year's $35 billion DaimlerChrysler hookup may have been the icebreaker. Now, the sale of Volvo or a Japanese player, such as Nissan Motor Co., could accelerate the trend, bankers say. ''There are five or six sizable deals that make sense,'' says a London banker who specializes in the industry. A Volvo or Nissan deal would likely produce tens of millions of dollars in investment banking fees. The sense that a new wave of mergers is imminent has investment bankers sidling up to key players. Goldman, Sachs & Co. looks well-placed because one of its Frankfurt partners, Alexander Dibelius, is close to Eckhard Cordes, DaimlerChrysler's strategist. Goldman also has good ties to Ford Motor Co., another acquisitive-minded member of the big six, not the least because newly named co-Chief Operating Officer John L. Thornton is on Ford's board. Other banks are angling for their share as well. They include Morgan Stanley Dean Witter, which has healthy ties to Fiat, and J.P. Morgan & Co., the firm advising Volvo. Lazard Freres & Co. also can't be counted out when major French players such as Renault and Peugeot are in the mix. UPROAR. But deals will have to be structured creatively to preserve jobs and national and personal prestige. The industry's high political profile and big CEO egos at predator and target companies mean any auto mergers will produce a lot of fireworks. At Volvo, for example, Chief Executive Leif Johannson would probably prefer to sell off the company's car division to concentrate on trucks and other businesses. Whether he will be able to is another question. Selling Volvo ''would create a tremendous uproar because Volvo symbolizes Sweden,'' says Sten Westerberg, chairman of Maizels, Westerberg & Co., a Stockholm investment bank. Still, the increasing costs of new-car development and the widening gap between industry winners and losers probably make deals inevitable. So be prepared to see investment bankers--and auto CEOs--justifying mergers of equals that amount to plain old takoevers. By Stanley Reed in London _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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