The Coming Week in Europe: Consolidation Remains the Focus as M&A Heats Up

After TotalFina's hostile bid for Elf, this week could see the equity markets focusing on other industries ripe for mergers.
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If you told a Frenchman five years ago that one day soon European businesses would warm to American-style hostile takeovers and general merger mania, he might have responded with, "when couchon fly."

Well, Porky Pig must have recently been seen circling the Eiffel Tower. Following close on the heels of the three-way merger fandango involving

Banque Nationale de Paris


Societe Generale






(TOT) - Get Report

last week launched a $43 billion hostile bid for fellow French oil company

Elf Aquitaine

(ELF) - Get Report


Naturally, rather than admit they were simply succumbing to gauche Yankee habits, the French government approved of the TotalFina bid, saying it was a chance to build a French national champion that can hold its own against Anglo-American rivals.

TotalFina's bid last week is more evidence of just how much consolidation fever has gripped the Continent, since the arrival of the euro and amid growing fears of being crushed by American and British behemoths. In the coming week, the equity markets will likely continue to focus on industries ripe for mergers, as the TotalFina bid could spur other linkups in the weeks to come.

According to

Thomson Financial Securities

data, European mergers totaled $346 billion in the first half of 1999, while the whole of 1998 only saw deals worth $541 billion. Although still less than the $570 billion in deals completed in the U.S. in the first six months of 1999, Europe seems poised for a record-breaking M&A year.

Whether all of the mergers go off without a hitch is another story. Elf's chairman, Philippe Jaffre, has said he has already studied the possibility of a merger with TotalFina, but concluded that the timing was premature and that there was too much overlap between the two companies.

On the economic front, the

European Union's

group on taxation meets Monday to discuss Luxembourg's objections to the EU's withholding tax. The U.K., which also has problems with the tax, will hold off voicing its concerns until London has presented its proposals for exempting the eurobond market from the tax.


European Central Bank's

Governing Council will meet Thursday to discuss monetary policy for the 11-country euro area. After the meeting, ECB President Wim Duisenberg will also hold the central bank's only press conference until the end of the summer holidays in August.

The ECB will be able to peruse European economic data next week that will likely show the continued absence of inflationary pressures in the eurozone, as Spain and France report consumer prices for June on Tuesday and Germany releases wholesale prices for the month sometime during the week.

"Prices are typically soft in June and a dip in food and clothing prices should offset a modest increase in services," says Catherine Lee, an economist for

Greenwich NatWest

in London. French "headline inflation is set to dip, but could edge up in the coming months."

Whether the price of pork chops in Paris will be part of that rise is anybody's guess.