Saturday, June 16, 2001

GE, Honeywell refuse to meet Europe's terms


'Negotiations are over' in merger deal

By Raf Casert
The Associated Press

        BRUSSELS, Belgium — European Union regulators suggested more bargaining Friday with General Electric Co. on its proposed $41 billion merger with Honeywell International, but GE insisted the EU must take or leave the last offer.

        The deal to create one of the world's largest industrial companies needs approval by Europe, but GE and Honeywell reaffirmed their willingness to walk away rather than meet EU demands that they sell off parts of their companies in the process.

        The companies submitted a final proposal Thursday, the formal deadline for making concessions, and acknowledged it was far from what EU regulators wanted.

        The deal, as proposed, would double the size of GE's Evendale-based jet-engine business, which last year had revenues of $11 billion. Honeywell's Phoenix-based aerospace business, which produces such things as small jet engines and cockpit flight controls, would represent about half the company's $25 billion in revenues.

        On Friday, EU Commission spokeswoman Amelia Torres said both firms still have “limited opportunity to submit modified proposals.”

        GE's response was immediate: “We will not make another proposal,” said company spokesman Gary Sheffer. “Negotiations are over.”

        EU regulators were worried that the merger would give GE an unfair advantage over some European companies. They will now pass along details of the GE offer to competitors and national antitrust authorities for comment, assess the responses and make a final recommendation to the European Commission, which will issue a decision by July 12.

        A decision to block the deal could damage trade relations between the United States and Europe, which were threatened in 1997 when the EU raised major objections to Boeing's impending merger with McDonnell Douglas.

        Europe has become tougher in its review of mergers, blocking or insisting on important modifications to several high-profile deals.

        GE had sought White House support for the deal, and at a news conference Friday in Warsaw, Poland, President Bush said, “We brought up the proposed merger at the appropriate levels during this trip and before the trip.

        “Our government looked at the merger and approved it. The Canadian government looked at the merger and approved it. And I am concerned that the Europeans have rejected it,” he said.

        In Paris, U.S. Commerce Secretary Don Evans urged the EU Commission to approve the deal, saying a successful deal would be “a positive kind of step for free trade”.

        “I would encourage (the EU) to think how constructive a merger like this would be,” Mr. Evans said at a news conference at the headquarters of the Organization for Economic Cooperation and Development.

        “I must be an eternal optimist,” he added. “I'm still hoping they will work out their differences.”

        GE chairman and chief executive Jack Welch, who had led negotiations in the final days in Brussels, has said he considered approval unlikely. Honeywell said it was ready with plans to move ahead on its own, but there was speculation that it may renew discussions with United Technologies Corp., which had been a suitor until GE moved in.

        The proposal submitted by GE and Honeywell to the European Commission included $2.2 billion in divestitures. GE said regulators wanted them to sell off billions more, including nearly all of Honeywell's aviation electronics business and its production of systems that provide power to planes while they are on the ground.
       



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