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AMERICAS: ADRs Returning to Role As Takeover Currency, THE

The use of American depositary receipts to pay for foreign takeovers of US companies likely will increase this year, market participants say.

Many foreign issuers have reconciled their accounting to US Generally Accepted Accounting Principles, or GAAl^ and listed their ADRs on US exchanges with the intention of developing a viable currency for US corporate acquisitions.

"We anticipate renewed interest in issuers using ADRs as acquisition currency for US companies in 2004," says Patrick Colle, London-based global business head of JPMorgan's ADR Group.

This is particularly so given the relative buying power of non-US currencies, combined with the attractiveness of non-US securities in the current foreign exchange environment, Colle says.

The general economic slowdown and weakening stock prices in 2001 and 2002 significantly muted the volume of M&A deals and increased the portion of cash used as takeover currency. This has begun to change, however, with stock prices and the economy on the rebound.

JPMorgan forecasts that global gross domestic product will rise 3.8% in 2004, following a 2.4% increase in 2003.The hank's economists predict above-trend growth will be particularly strong in the eurozone, Japan and emerging Asia.

Christopher Sturdy, managing director and head of Bank of New York's ADR division, says a number of European companies are getting ready to make acquisitions in the US.

With European stock markets strong and the dollar weak, the role of ADRs in cross-border M&A is likely to expand, he says.

Bermuda Company Launches ADRs

Deutsche Bank announced the launch of an unsponsored American depositary receipt program of Bermuda-based Benfleld Group, which offers reinsurance intermediary and risk advisory services.

Benfield structures, arranges and places reinsurance on behalf of insurance and reinsurance companies but does not write insurance itself.

Each ADR is equivalent to two common shares, which are listed on the London Stock Exchange.

Copyright Global Finance Media Inc. Mar 2004
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