ANALYSIS: Media Watch - Little hope for GE-Honeywell deal, despite11th hour efforts

General Electric is one of the most revered American corporations,

held on a pedestal as an icon by many. So every media outlet worth its

salt provided heavy coverage of the unfolding drama when the company's

dollars 42 billion bid to acquire Honeywell was tripped up in Europe.

European Union (EU) regulators have indicated they will likely block the

deal by July 12, at the latest, despite last-minute concessions by GE to

save the deal.



Recent coverage has conveyed widespread skepticism that the deal will

ever happen. Newsweek (June 25) reported that GE's legendary CEO, Jack

Welch, announced "the deal was all but dead." Even with GE's last-minute

concessions, which addressed the EU's primary concerns, the outlook

still looked bleak. "While odds of reaching an agreement seemed improved

by the fact that discussions were taking place, the chance of finding a

compromise that satisfied all players still seemed slim" (Atlanta

Journal-Constitution, June 28).



The media also took notice of the US government's efforts to pressure

the EU to reconsider its position. The media often pointed out that this

would mark the first time the EU has nixed a deal involving two US-based

companies that had already been approved by US regulators. Few media

outlets took the time to point out that the US blocked an EU-approved

merger of two European companies last year: France's Air Liquide and the

UK's BOC.



President Bush, his cabinet and leading senators earned substantial

coverage because of their bewilderment that the EU would scuttle the

deal. In perhaps the harshest attack on the EU itself, Treasury

Secretary Paul O'Neill fumed that European regulators "are the closest

thing you can find to an autocratic organization that can successfully

impose their will on things that one would think are outside their scope

of attention" (USA Today, June 28).



The atmosphere appears to have become so heated over the GE-Honeywell

episode that reports began to address the impact the dispute would have

on transatlantic business relations. Some stories discussed the threat

of a trade war while other reports focused on the hesitation that

companies would have about trying to pull off mega-mergers in the

future.



A number of media outlets explained the rationale behind the EU's

opposition, with the most frequent concern being that GE would bundle

its jet engines with Honeywell's avionics flight equipment into a suite

of products. Furthermore, the EU worried that GE's aircraft leasing unit

would pressure customers to buy GE products. The Wall Street Journal

(June 15) described GE as being "thrown for a loop by an argument it

viewed as illogical and irrelevant."



Other reports highlighted the different criteria by which the deal was

judged. A European executive told the Los Angeles Times (June 27), "The

difference between the (regulatory) processes in Brussels and the United

States is that US authorities look from the angle of the consumer

whereas Brussels authorities look more from the competition's point of

view."



While there appear to be slim odds that the GE-Honeywell deal will be

approved, pundits caution that Jack Welch did not get where he is today

without having a trick or two up his sleeve. Anything can happen, but

the case has certainly drawn attention to the fact that mega-mergers not

only have to pass muster in the US, but in Europe as well.



Evaluation and analysis by CARMA International. Media Watch can be found

at www.carma.com.



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