European ‘champions’ form to repel US and Asian predators
SENIOR bankers are preparing for a swathe of new European “champions” to be created as the continent looks to protect itself from American and Asian predators.
The predictions come months after French president Emmanuel Macron said in a speech at Paris’s Sorbonne University that boosting the industrial and economic power of Europe meant consolidating a competitive European industry on a “global scale”. His call for a “refoundation of Europe” coincided with the news that French transport firm Alstom had agreed to a deal with German engineering giant Siemens.
The agreement between the two firms aims to create a new “European champion in the rail industry” that would pit it against China’s gigantic state-owned operator CRRC.
A day later it emerged that France’s biggest shipyard STX had struck a deal with Italian group Fincantieri. City bankers say more is to come, with Brexit adding extra impetus for firms to bulk up and compete on a global scale. Franco-german mergers are particularly likely to take place, advisers predict.
“Europe needs to respond to a more aggressive expansionary agenda from Asian companies and they need to respond to the US increasingly creating their own national champions,” said JP Morgan’s David Lomer.
“This combination will accelerate pan-european consolidation as the continent thinks about how it too can create its own pan-european champions.” Citigroup’s Jan Skarbek added: “We may see more intra-europe deals – particularly between France and Germany – which have historically been hard. We may see a rush.
“Whatever precise shape and form Brexit takes, if you’re France or Germany you have an incentive to see paneuropean businesses form.”
Dealogic data shows that the value of M&A deals between European countries last year rose 128pc to its highest level since 2014. Big deals recorded in 2017 included the French lens maker Essilor’s $25bn (£18.4m) swoop on Italian glasses giant Luxottica, the brand behind Ray Ban’s sunglasses. And the momentum looks set to continue.
“There is revitalised interest in Europe, especially from large US and UK companies, post the French elections, which in itself may encourage more inter-european consolidation of EU companies as a defensive move,” said HSBC’S Philip Noblet.