Dow Midday: Pfizer and General Electric Lead Stocks Lower; Can Anyone Win in Europe?

Major Dow components are trying to grow through European acquisitions, but neither success nor failure is helping share prices.

Jun 23, 2014 at 12:00PM

The Dow Jones Industrials (DJINDICES:^DJI) had fallen 40 points as of noon. EDT Monday. Favorable housing data weren't enough to lift the Dow to even further highs as investors appeared ready for a pause in the index's attempt to climb above 17,000. One of the biggest surprises of the day was that both Pfizer (NYSE:PFE) and General Electric (NYSE:GE) were among the worst performers in the Dow Jones Industrials, even though the two companies find themselves in very different situations in their efforts to expand into Europe.

Source: General Electric.

In relation to goings-on in Europe, Pfizer's drop of 1.4% is the less surprising of the two Dow stocks today. Shareholders still appear disappointed at Pfizer's inability to follow through on its bid to acquire one of its major U.K. pharmaceutical peers, which would have boosted Pfizer's pipeline of drugs and potentially given it more favorable tax treatment in a tax-inversion transaction. Late last week, one of Pfizer's main U.S. rivals made a similar offer for another British company, and it too was rebuffed for arguably making too low a bid. This trend suggests that while U.S. pharma companies see the benefits of expanding into Europe -- both for business purposes and for tax benefits -- their counterparts across the Atlantic will hold out for top-dollar in any buyout. That's bad news for Pfizer in anticipation of its possibly reconsidering a bid in six months.

Ge Energy

Source: General Electric.

General Electric's 1.1% decline today makes much less sense. General Electric actually won approval of its buyout offer for the energy business of French congomerate Alstom, with Alstom CEO Patrick Kron arguing against criticism that the deal might cost France vital jobs and give a foreign conglomerate too much control over key French assets. Yet investors are likely responding to two concerns. One is that even though the French government withdrew its primary objections to the deal after General Electric made some concessions, the agreement still has to go through regulatory and labor-negotiation hurdles before being locked in. But the larger concern is the concessions themselves, by which General Electric will take stakes in joint ventures for certain critical assets and the French government will own a preferred stake in assets concerning nuclear power plant technology and security measures. With a much messier transaction than initially envisioned, General Electric will have to build solid ongoing relationships with its partners for the move to be successful.

U.S. investors need to remember that the European market is a lot different from what they're used to seeing domestically. As a result, in cases like this, trying to move into Europe might seem like a no-win scenario. Nevertheless, you can expect other Dow components to follow the lead of General Electric and Pfizer in their efforts to gain even larger global scope in the years to come.

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Dan Caplinger owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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