EU rejects last-ditch GE effort on Honeywell, sources say
Associated Press
Friday, June 29, 2001
BRUSSELS, BELGIUM -- European Union regulators rejected General Electric Company's last-minute concession Thursday to try to save its $41 billion bid for
Honeywell International, a source close to the deal said.
The source, speaking on condition of anonymity, declined to give specifics on the European Commission's reasoning but said the revised offer was rejected on its
substance, not because it came too late.
GE spokeswoman Louise Binns declined to comment.
The rejection would clear the way for European Competition Commissioner Mario Monti to block the deal formally at its meeting Tuesday. The deadline for a decision
is July 12.
Early Thursday, GE offered to sell just under 20 percent of its cash-cow aircraft-financing unit, GE Capital Aviation Services (GECAS), to an independent "financial
investor," another source close to the deal said earlier on condition of anonymity.
The stake would be placed privately and not be available to a competitor or the general public, the source said. In addition, the value of Honeywell assets GE would have
to shed would be "substantially reduced" from the $2.2 billion that GE proposed in its June 14 "final offer."
Binns confirmed earlier that "informal discussions" were underway between lawyers representing GE and European Commission officials. She said the options "are
within the financial parameters" of the June 14 offer but declined to elaborate.
EU Commission spokeswoman Amelia Torres also confirmed earlier that discussions were being held but refused to comment further. She could not be reached early
today for comment.
Honeywell shares had risen $2.29, or 6.2 percent, to $39.29, in trading Thursday; GE shares rose 50 cents to $48.76. After reports of the EU rejection, Honeywell shares
fell $3.35, or 8.8 percent, to $34.85 in after-hours trading. GE shares rose 98 cents, or 2 percent, to $49.85 in extended trading.
Torres had said the July 12 deadline cannot be extended. She refused to say whether the commission was considering putting off its expected vote on Tuesday for a week.
Although the deal won conditional antitrust clearance in Washington, D.C., in May, it has stalled in Europe, provoking worried comments about transatlantic relations
from U.S. politicians.
EU antitrust officials expressed concern that GECAS, one of the world's top purchasers of aircraft, would promote GE-Honeywell equipment to the detriment of
competitors, which it argued could lead to higher prices. They had pushed GE to spin off part of GECAS to independent investors to ensure greater discipline on GE
without threatening its control of the unit.
GE proposed introducing separate management for GECAS but had refused to consider selling a minority share.
After GE's June 14 offer was rejected, Monti said GE could get away with fewer divestments if it agreed to a "structural commitment" with regard to GECAS.
The source close to the deal described the new offer as a "response to the messages Monti is putting out."
Asked whether there was enough time for GE to save the deal, Torres said the commission can accept late proposals only "if they are clear-cut and they solve all the
commission's concerns in an unequivocal way."
There also must be enough time for the advisory committee of antitrust officials from the 15 EU countries to review the final package, she said. But she refused to say
how much time that might take.
Torres brushed aside criticism that the deal could harm U.S.-European relations, which she described as solid.
"This is about competition law and enforcing competition law in Europe and has nothing to do with politics or trade relations," she said.
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