GE ASKS EU COURT TO OVERTURN HONEYWELL MERGER BAN

27 May 04. General Electric Co. appealed Thursday for a European Union court to overturn a ban on its merger with Honeywell International Inc. claiming EU regulators buried evidence and disregarded data.

GE’s lead lawyer Nicolas Green said merger officials for the EU’s executive Commission kept 14 documents in their files, including a letter from aerospace titan Airbus that said the merger could go ahead without reducing competition. Green called it “intolerable” that outside experts from EU governments were unable to review the evidence.

However, Commission officials downplayed the significance of the documents and Judge Nicholas Forwood appeared to take took a skeptical tone toward the material, repeatedly asking GE’s lawyers if its absence had disadvantaged the company’s defense. Green said the effect was to give EU investigators a “jaundiced view” of the deal rather than stifle GE’s arguments. EU Commission lawyer Richard Lyall acknowledged a mistake. “I can only agree that in the normal course of things that (letter) ought to have been disclosed,” he said.

Enrique Gonzalez-Diaz, a former Commission official who led the investigation in 2000 and 2001, called the incident an “honest mistake.” GE’s US$42 billion deal with Honeywell was to have been the world’s biggest industrial merger. It was the first all-American deal blocked by the EU, prompting criticism from U.S. lawmakers.

Two rival companies — Britain’s Rolls-Royce PLC and Rockwell Collins Inc, a U.S. maker of aircraft electronics — sent lawyers to the court in defense of the EU’s decision to block the merger. They backed commission findings that a combined GE-Honeywell would be able to shut out competitors by “bundling” GE’s engines with Honeywell’s aviation systems.

“No pure avionics company could give its customers enough of a discount to break that bundle,” said Trevor Soames, an attorney representing Rockwell Collins. A merged GE-Honeywell “would win most any competition,” he added.GE also accused the Commission of keeping a report secret that was skeptical about aspects of the case. GE obtained the report in the past two weeks, at the request of the court. The Commission’s failure to disclose the documents earlier was inexcusable and gave the court grounds for overturning the decision, said Green. Since the July 2001 decision, the Commission has had three merger vetoes overturned in the European Court of First Instance – where both GE and Honeywell have appealed. GE says it has no plans to revive its takeover of Honeywell, but it wants judges to scrap findings that it already dominates the large jet aircraft engine market. GE is assisted by Cherie Blair, the lawyer wife of British Prime Minister Tony Blair, but she did not plead the case in Thursday’s presentations.

Comment: An excellent description of the negotiations with the EU are contained in our recent book recommendation, Jack Welch’s book, ‘Straight From the Gut’, (Headline 2001 ISBN 0 7472 4979 2). This book shows the remarkable growth of GE to one of the world’s largest companies and shows quite how much advances in US management dwarf those in Europe and demonstrates the sheer size of the US industrial base and expertise. The EU Commisioner Mario Monti refused to call Jack Welch ‘Jack’ until the negotiations ended!
(Source: Associated Press)