A year of merging markets

Wolfgang Mayrhuber, CEO of Lufthansa, announcing the takeover of Swiss in March Keystone Archive

Mergers, buyouts, public offerings – 2005 was a stormy year for Switzerland from a business point of view.

Several important names such as Swiss, Unaxis and Saia-Burgess found themselves in foreign hands, although Swiss firms also got out their chequebooks.

Around the world, an average of 2,255 business transactions – totalling some SFr242 billion ($185 billion) – were made every month in 2005, according to a recent study by financial analysts KPMG.

For its part, Switzerland was the battleground for two major hostile takeovers, involving the Swiss electronic-parts manufacturer Saia-Burgess and the measuring group Leica Geosystems.

In June the Swedish technology company Hexagon launched a hostile takeover bid for Leica, offering SFr440 per share. United States rival Danaher stepped in a month later with a white-knight offer of SFr500 but pulled out in September.

In July, the Japanese group Sumida launched a SFr950-per-share bid for Saia-Burgess, which was seen as hostile by Saia and not reflecting the true value of the company.

A month later Hong Kong’s Johnson Electric, Saia’s long-term business partner, made a friendly offer of SFr1,060 per share, valuing the company at SFr696 million. Sumida pulled out and the board of Saia-Burgess unanimously approved Johnson Electric’s offer.

Surprises

A stir was caused in March when Germany’s Lufthansa announced it was taking over Switzerland’s troubled national airline, Swiss. The Swiss government – the biggest shareholder in the company – said it supported the buyout.

Then in May the founding family of loss-making Swiss technology firm Unaxis sold its remaining stake in the company to Austrian investment group Victory.

Virtually everyone was wrong-footed in September when Cablecom, Switzerland’s largest cable operator, announced plans to go public on the Swiss stock exchange only to announce 24 hours later that it was being taken over by US broadband company Liberty Global.

Liberty Global, based in Denver, Colorado, said it was buying 100 per cent of heavily debt-laden Cablecom for SFr2.8 billion.

In the biggest non-deal of the year, Swisscom was prevented from purchasing Irish telecoms operator Eircom in November, after the Swiss government banned it from making foreign acquisitions.

The government had just announced plans to sell its 66.1-per-cent share in Switzerland’s leading telecoms group.

The collapse of the Eircom deal wiped SFr1.5 billion off the value of Swisscom shares.

Acquisitions

Swiss firms also went on the offensive in 2005, with Basel-based pharmaceuticals giant Novartis leading the way.

In February, Novartis announced major plans to become the world’s biggest producer of generic drugs, with its purchase of Germany’s privately held Hexal.

The deal included spending €5.65 billion in cash for outright ownership of Hexal and a two-thirds stake in US company Eon Labs, both of which will be integrated into its Sandoz generics unit.

In July Novartis said it was strengthening its over-the-counter business by acquiring the rights to produce and market a North American product range. The deal with New York-based firm Bristol-Myers Squibb was worth $660 million (SFr790 million).

In December shares in Swiss vaccine maker Berna Biotech rose sharply after Novartis said it was considering a cash bid. It had appeared that the sale of Berna Biotech to Novartis’s smaller Dutch rival Crucell was already a done deal.

Swiss cement giant Holcim put in a SFr4 billion offer for Britain’s Aggregate Industries in January. It also announced a new venture in growth market India.

In November Swiss Re announced it would take over the insurance division of General Electric to become the world’s biggest reinsurer. Swiss Re said it would purchase American group GE Insurance Solutions for $6.8 billion.

At home

In addition to the big international transactions, other deals were done among Swiss companies.

In September UBS, Switzerland’s biggest bank, agreed to sell its SBC Wealth Management division to rival Julius Bär in a deal valued at SFr5.6 billion ($4.6 billion).

Also in September the top Swiss discount chain Denner announced it would take over its German-owned competitor, Pick Pay, for an estimated SFr50-70 million.

In possibly the most emotional deal of the year, in April the official manufacturer of Swiss Army knives, Victorinox, took over its much smaller competitor and only rival, Wenger.

The acquisition meant that knife production of the genuine article will remain safely in Swiss hands and jobs that were under threat at Wenger in Delémont, canton Jura, were saved.

swissinfo with agencies

Key facts

Swiss exports for 2003 totalled $133 billion (15th place among industrialised nations).
Swiss imports totalled $116 billion (17th).
The main exports are chemicals and pharmaceuticals, ahead of electronics and vehicles.
The main export countries are Germany, the United States and France.