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Foreign Buyers Flock To U.S. Companies

Not since 1990, has there been such a high percentage of foreigners opening their check books to buy U.S. companies (see stats below). Today's $8.5 billion offer for Commerce Bank from Canada's TD Bank is just the latest and part of a growing trend of cross border transactions coming from Canada and other countries. As the dollar continues to weaken, traders expect even more buyers from around the globe to hunt for U.S. companies they can pick up on the cheap.

"That's the evidence of a weak dollar transaction. Whether it's Canada or another country, it'll be interesting to see how the market is treated from a dollar point of view," said Bill Nichols, senior managing director at Bear Stearns.

Thomson Financial data shows that year-to-date, 21.19% of deals in the U.S. have involved foreign buyers. It's not a stretch to say that number will grow. Foreign buyers should increasingly make up the buying pool as private equity buyers stay on the sidelines while the still ailing credit markets work through a record backlog of buyout debt.

The last time the percentage of foreign buyer acquisitions was this high was in 1990 when it reached 28.2% of all deals. This year, there have been $1.3 trillion announced deals to date. In 1990, there were $172.58 billion worth of deals for U.S. companies. The year 2000 also saw a big influx of foreign buyers, amounting to 19%. Last year, foreigners totaled 12.7% of buyers. There were a total $1.5 trillion deals in 2006.

The Canadian dollar hit one for one parity with the U.S. dollar on September 20 for the first time in 31 years. Needless to say, an increased amount of buying has been coming from Canada. Canadian deals year-to-date total $51.4 billion, up from $36.1 billion last year.

So far this year, "one of the biggest deals obviously was the Saudi investment group buying GE plastic," said Richard Peterson, director of Capital Markets at Thomson Financial. "Right now on the horizon, there's no impetus that will stop this continuing flood of foreign buying. Obviously, you have the combination of weak currency, attractive assets and buyers who covet having a foothold in the U.S. Put all that together and you have more foreign participation," said Peterson, who specializes in mergers and initial public offerings.

The types of companies that are attracting interest include technology, industrial, financial, and real estate. "If you take the view that a bottom is near in some of these markets, what looks like like a risk in 2007 might be a great bargain in a year or two," Peterson said.

Traders tell us they see the telltale signs of foreigners snapping up U.S. stocks.

John O'Donoghue, co-head of trading at Cowen, says he sees signs that foreign entities are buying stocks through ETFs such as oil services and other plays. But he says he has not seen buying in individual stock names. "Foreign investors can buy USA Inc here at a 20 percent discount...There's definite downside support for this tape vis a vis foreign buyers," said O'Donoghue.

The dollar was up todaybut continues to trade at historic lows against a basket of currencies. It has lost about 7% year to date against the euro.

Leading all-time foreign acquisitions in the U.S.:

Date
Announced

Target Name

Acquiror Name

Acquiror
Nation

Rank
Value of
Deal ($mil)

1/15/1999

AirTouch Communications Inc

Vodafone Group PLC

United Kingdom

65,762.87

8/11/1998

Amoco Corp

British Petroleum Co PLC

United Kingdom

52,717.09

5/6/1998

Chrysler Corp

Daimler-Benz AG

Germany

40,466.48

7/24/2000

VoiceStream Wireless Corp

Deutsche Telekom AG

Germany

34,060.57

4/1/1999

Atlantic Richfield Co

BP Amoco PLC

United Kingdom

33,485.21

5/2/2000

Bestfoods

Unilever PLC

United Kingdom

23,699.21

7/17/2007

Lyondell Chemical Co

Basell NV

Netherlands

18,765.48

11/14/2002

Household International Inc

HSBC Holdings PLC{HSBC}

United Kingdom

15,294.06

4/23/2007

MedImmune Inc

AstraZeneca PLC

United Kingdom

14,681.23

3/24/2006

Lucent Technologies Inc

Alcatel SA

France

14,674.18

Largest foreign acquisitions in U.S. real estate:

Date
Announced

Target Name

Acquiror Name

Acquiror
Nation

Rank
Value of
Deal ($mil)

2/27/2007

New Plan Excel Realty Trust

Centro Retail Group

Australia

5,364.84

6/5/2006

Trizec Properties Inc

Investor Group

Canada

4,746.76

7/9/2006

Heritage Ppty Invest Trust Inc

Centro Properties Group

Australia

3,113.58

9/26/2000

Urban Shopping Centers Inc

Rodamco North America NV

Netherlands

2,884.59

8/22/2007

CityCenter Holdings LLC

Infinity World Investments

Utd Arab Em

2,700.00

2/14/2005

CalPERS/First Washington-Ret

Investor Group

Australia

2,680.00

7/19/2007

Williams Scotsman Int Inc

Algeco SA

France

2,242.27

11/1/2004

US Premium Office Properties

Investor Group

Singapore

1,852.00

4/14/1997

APL Ltd

Neptune Orient Lines Ltd

Singapore

1,301.70

12/25/2005

Axa Financial Center,New York

Hudson Waterfront Associates

Hong Kong

1,250.00

Source: Thomson Financial

Questions? Comments? marketinsider@cnbc.com

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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