Swiss firms compete with US for lead in deals
LONDON: Switzerland is flexing its muscle.
The Alpine nation, with about 2% of the US population, is running neck-and-neck with the world’s biggest economy in global deal-making this year with a combined Us$48bil of takeovers, including the largest: Glencore International Plc’s Us$38bil planned purchase of Xstrata Plc.
Underpinned by solid earnings and balance sheets, Swiss companies from drugmaker Roche Holding AG to engineering company ABB Ltd are stepping up acquisitions, taking advantage of the 7% gain in the Swiss franc against the euro in the past year and the relative weakness of European competitors stymied by the debt crisis.
Nestle SA, Novartis AG and Syngenta AG are among those with cash to spend on deals.
Swiss corporations “see this window of opportunity to go for acquisitions,” said Lorenz Reinhard, who manages five billion francs (Us$5.5bil) in Swiss equities at Pictet & Cie in Geneva. Strong balance sheets and the strength of the franc had combined to produce “a unique situation,” he said.
Glencore’s planned takeover of Xstrata, Roche’s Us$5.7bil hostile bid for diagnostics company Illumina Inc, and ABB’S Us$3.9bil acquisition of electrical circuit-maker Thomas & Betts Corp are the three largest deals out of Europe this year, with the latter targets in the United States.
In total, Swiss deals account for 59% of the Us$81bil of takeovers announced by all western European acquirers, according to data compiled by Bloomberg.
Switzerland’s 20 biggest listed companies have an average profit margin of 18%, almost double the 9.3% average of the 309 European companies listed on the Euro Stoxx Index, according to Bloomberg data. They also have big cash piles to tap after boosting cash and near-cash items about 43% to 214 billion francs since 2009, based on the latest company filings.
More deals are in the pipeline. Vevey, Switzerland-based Nestle, which has more than Us$8bil in cash, was vying with Danone SA for Pfizer Inc’s infant-nutrition business, which might fetch more than Us$10bil, people familiar with the situation said this month.