Buying out the First World
The usual case has been that an American or Western European firm buys a company in China, in Thailand, in Hungary, in Egypt. Globalization has been perceived as an expansion of Western military power and cultural hegemony by other means. But the world may be changing.
That's according to a recent Wall Street Journal article called "Companies in Emerging Markets Show Clout in Global Deal Game" (2/13/2006). As the article puts it
Companies from emerging markets, armed with piles of cash from rising commodity prices and abundant financing, are snapping up targets in Europe and the U.S., a trend that could shift the global economic balance of power in some industries.
The example of recent deals cited in the article include the following:
- The purchase of port operator Peninsular & Oriental Steam Navigation Co. Dubai Ports World from the United Arab Emirates. That means that the top three world port operators will be headquartered in Dubai, Hong Kong, and Singapore.
- The purchase of IBM's PC division by China's Lenovo Group.
- An Egyptian investor, the owner of Egyptian phone company Orascom, bought Wind Telecommunicazioni from Italian utility Enel SpA.
- India's Bharat Forge Ltd. bought steelmaker Imatra Kilsta AB of Sweden.
- Indian petrochemical company Reliance Industries bought of German polyester fiber manufacturer Trevira GmbH.
- The Videocon group, an Indian electronics company, purchased the picture-tube business of France's Thomson SA.
- Just last week, India's Dr. Reddy's Laboratories Ltd. Announced it had agreed to by German pharmaceutical maker Betapharm Arzneimittel.
- Mexico's Cemex bought cement maker RMC Group PLC of the UK.
- Hong Kong's Cheung Kong Infrastructure Holdings Ltd. led a consortium in buying UK gas-distribution network National Grid Transco PLC.
- Indian telecommunications company but the transoceanic network fiber-optic network of Tyco Industries.
While these deals are quite impressive and just some of the most salient ones, they are still a small portion of all worldwide deals. But they are growing fast, as more and more capital gets transferred to formerly poor countries and as the companies start to look to globalize and diversify.
For some in the West, it is troubling. The global firms that dominate the US company are+-+ usually American-based or at least Europe- or Japan-based. They maintain an American face, even if all the manufacturing and support has been transferred overseas. But even that comfort level is starting to change. The US and Europe are getting a growing taste over being on the other side of the globalism equation as key services became in truly foreign hands.
The current controversy about Dubai Ports taking over operation of a number of key US ports is a result of that fear. The country is about to trust much of its port security in the hands of a company controlled by an Arab oil country, one that has been used by terrorists as an operation base. The controversy over China's CNOOC almost buying American oil company Unocal is another example. These are issues that many emerging countries have dealt with for years, and now it is happening in the West.
