The Dow Treads Water as Pfizer, General Electric Struggle With Mergers in Europe

The Dow Jones Industrials (DJINDICES: ^DJI  ) was down just four points as of 12:30 p.m. EDT Friday. Even after two days of sharp declines, investors aren't willing to dive in to buy the dips as they have in the past. As some investors focus on the latest disclosure reports of purchases by institutional investors, others have noticed some of the difficulties that Dow components Pfizer (NYSE: PFE  ) and General Electric (NYSE: GE  ) are having in trying to acquire companies based in Europe. The question both companies must answer is whether a different M&A mindset on the other side of the Atlantic will thwart their growth plans.

Pfizer, which rose 1.3% by lunchtime, has faced scrutiny from a number of foreign governments in its $100-plus billion takeover bid for British pharma peer AstraZeneca. Reassurances from Pfizer regarding the impact on jobs and investment in the U.K. has largely appeased British Prime Minister David Cameron and makes U.K. approval of a possible takeover appear much more likely. Yet more recently, Swedish government ministers have called for a possible rejection of Pfizer's takeover bid, citing potential damage to the Scandinavian nation's life-science and research industry and a potential loss of jobs. Despite being based in the U.K., AstraZeneca has some roots in Sweden, and the fact that Pfizer has said part of the cost savings involved in a merger would come from reduced research budgets could have an impact on the country. The move has even raised speculation that Sweden might align itself more closely with countries that take a more aggressive position in limiting M&A activity.

Source: General Electric.

General Electric was close to unchanged, but it too has struggled in Europe, as its buyout plans for the energy business of French conglomerate Alstom have come under fire from the French government. Earlier this week, France broadened its power to prevent takeovers in so-called strategic industries, giving itself the ability to intervene in this situation and forcing General Electric to take more steps to try to allay French concerns. With the possibility that a competing bid from one of GE's rivals might be in the offing, General Electric has no assurances that it can close on what would be a strong shot in the arm for the conglomerate's attempts to widen its geographical reach in its key energy segment.

With mergers and acquisitions playing such an important role in the stock market's gains lately, efforts by European governments to clamp down on mergers seem unwelcome. For investors who follow the Dow Jones Industrials -- and especially for shareholders of General Electric and Pfizer -- obstacles to lucrative acquisitions could prove costly in the long run.

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2960856, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:37:22 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement