NEW YORK -- Foreign investors exploited the declining U.S. dollar over the past three months to snap up American companies at the fastest pace in at least a decade.
Buyers from Dubai to the Netherlands accounted for 46 percent of the $230.5 billion in U.S. mergers and acquisitions announced in the fourth quarter, the biggest share since 1998 when Bloomberg started compiling the data.
The total excludes $17.9 billion of so-called passive investments by state-run funds in Asia and the Middle East in U.S. banks, including Citigroup Inc.
The influx of overseas buyers cushioned a drop in domestic deals, as tighter credit markets ended the leveraged buyout boom that spurred record-setting takeovers in the first half 2007. Foreign acquirers, who stepped in as the dollar fell 10 percent against the euro last year, show no sign of losing interest, according to bankers and lawyers.
"In 2006 and the first half of 2007, it was cheap financing that allowed private equity firms to compete," said Lee Lebrun, head of mergers and acquisitions for the Americas at UBS AG, the Swiss banking giant. Now, "foreign corporates with strong currencies" dominate, he said.
The dollar declined to $1.4967 per euro Nov. 23, the lowest since the euro's introduction in 1999, and trades just a little above that currently. Analysts expect it to rise to $1.39 against the euro in the next year.
"With the dollar being valued the way it presently is, basic economics should lead us to expect continued strong foreign investment in the U.S.," said Frederick S. Green, co-head of U.S. mergers and acquisitions at Weil, Gotshal & Manges LLP, a New York law firm specializing in international services.
The quarter's biggest transactions included Toronto-Dominion Bank's takeover of Commerce Bancorp Inc., of New Jersey, for $8.5 billion, and the $8.1 billion purchase of Chicago's Navteq Corp. by Finland's Nokia Oyj, the No. 1 mobile phone maker.
Weil Gotshal advised Turkey's Yildiz Holding AS when it agreed to pay $850 million for chocolate maker Godiva, of Camden, N.J.
Foreign buyers last year avoided the political controversy that arose in 2006 when Dubai-owned DP World added six U.S. port terminals, including one in Baltimore, with the purchase of Peninsular & Oriental Steam Navigation Co. of London.
U.S. lawmakers said Dubai's ownership of the port operations could threaten national security. DP World, though it operates 42 terminals in 22 countries, was forced to sell them to American International Group Inc.
"In a post-Dubai Ports world, you've had two years that turned out to be record years for U.S. foreign investment," said Ivan A. Schlager, a partner at Skadden, Arps, Slate, Meagher & Flom in Washington. "It really dispels the idea that the U.S. was turning inward. 2008 will shape up to be probably an even bigger year."
Schlager is advising Nasdaq Stock Market Inc. in a transaction that will result in Borse Dubai owning a minority stake in the electronic exchange. It won approval this week from the Committee on Foreign Investment in the U.S., which reviews purchases on national-security grounds.
Foreign companies were the buyers in $105.3 billion of the $230.5 billion of U.S. purchases in the fourth quarter, Bloomberg data show. Overseas acquirers have accounted for just 18 percent of U.S. deals per year on average since 1998.
Some of the biggest U.S. merger advisers have themselves turned to foreign investors over the past three months to shore up capital depleted by losses on subprime home loans.
Citigroup, the biggest U.S. bank, raised $7.5 billion from Abu Dhabi's sovereign wealth fund. Firms controlled by China invested $5 billion in Morgan Stanley and $1 billion in Bear Stearns Cos., and Merrill Lynch & Co. got $4.4 billion from Singapore's government-run fund, Temasek Holdings.