Europeans make it big with US buys

A Frenchman of Napoleonic stature educated at the alma mater of top Paris technocrats, an Englishman in a pin-striped suit and…

A Frenchman of Napoleonic stature educated at the alma mater of top Paris technocrats, an Englishman in a pin-striped suit and braces with a passion for cricket and a flamboyant Spaniard with a penchant for Latin music and late nights.

A new generation of Europeans is bursting on to the world stage and emerging as global business leaders in its own right. Jean-Marie Messier, Chris Gent and Juan Villalonga have each taken a bold gamble to break out of their domestic - and generally protected - national markets and buy their way to global prominence by acquiring large US businesses.

Such a wave of US acquisitions by European companies has not been seen since the later 1980s, when companies such as Hanson, Lafarge and Tomkins trawled America for under valued assets. Along the way, figures such as Lords Hanson and White and Sir James Goldsmith became famous - and feared - business icons.

The latest acquisitions are equally striking, but of a different kind. Instead of undervalued old-economy companies, the new European leaders are paying high prices for media and communications assets.

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The latest deal came this week when Mr Messier's Vivendi - formerly known as Generale des Eaux - acquired the media assets of Seagram of Canada, and pooled them with Canal Plus of France, in a deal worth $34 billion (€36 billion).

The figures leading the new US push are starting to attract as much controversy as their 1980s counterparts. This week, Mr Messier had to defend himself against accusations that he was naively over-paying for an asset he would be unable to control in Seagram's Universal Studios.

Mr Gent also faced criticism for a £10 million shares and cash bonus agreed by the board of Vodafone AirTouch, his telecoms group, for his successful takeover of Mannesmann of Germany this year. Meanwhile, shares in Telefonica, the Spanish telecoms group led by Mr Villalonga, fell when it emerged that an options trade he made in 1998 was being investigated by regulators.

The controversies partly reflect the fact that each man has come to personify his company. The fall in Telefonica shares showed that investors regarded Mr Villalonga as vital to the company's success, while the £10 million bonus reflected a similar attitude towards Mr Gent from Vodafone AirTouch's directors. Yet, whatever the similarities of their business ambitions, the three men are very different characters.

Mr Messier (43) is a former French treasury official who studied at the Ecole Nationale d'Administration. He has displayed a grand strategic sense in broadening Vivendi into a global force not only in media but in water supply.

The scale of his ambitions has been evident since early last year when he agreed to buy US Filter, by far the largest private US water company, for $6.2 billion in cash. That was the company's fourth big North American purchase in less than six months. Along with Suez Lyonnaise des Eaux, its fellow French multi-utility, Vivendi is already an undisputed world leader in this mundane but politically charged field.

Mr Gent, who runs the world's largest mobile operator based in the genteel English county town of Newbury, is a regular fixture at English cricket matches. But his $62 billion deal last year, luring AirTouch of the US from Bell Atlantic and then the takeover of Mannesmann of Germany means Mr Gent's other defining quality is his global perspective.

Mr Villalonga has become a well-known figure in the pages of US business magazines following the recent $12.5 billion takeover of Lycos, the Nasdaq-listed Internet group, by Terra Networks, an Internet group controlled by Telefonica. By thrusting into the US, where many European businesses have come unstuck before, each man has attracted a new level of scrutiny.

One question is whether they have paid too much for their new assets. A second - particularly for Mr Messier and Mr Villalonga - is whether they can exert control over their US operations, or will be taken for a ride. There is a long history of US media figures - particularly in Hollywood - ignoring and scorning overseas buyers.

Vivendi's share price has fallen by more than 20 per cent since news of talks between Mr Messier and Mr Edgar Bronfman jnr, the chief executive of Seagram, emerged just more than 10 days ago. Part of the reason for that was investors felt that Mr Bronfman had been shopping his company around for months to media moguls in the US, including Rupert Murdoch, and Vivendi proved the only company prepared to pay a 46 per cent premium to the market price. Mr Villalonga was also accused by some investors of paying too much for Lycos, which Terra acquired at an 80 per cent premium.

Mr Messier has already tried to start heading off the concern that a scion of the French establishment is not going to make an effective Hollywood studio boss. "We will not send French guys out to manage Hollywood," Mr Messier pledged this week. "Let's have US studios managed by US professionals." That may be some comfort for those who recall Mr Giancarlo Paretti, the Italian investor backed by Credit Lyonnais, who took over the Metro-Goldwyn-Mayer studios in the early 1990s with disastrous consequences both for him and the bank.

European acquirers do not necessarily prove unequal to the task of exerting their will over US companies. For evidence of this, one can look at Mr Jurgen Schrempp, the German chairman of DaimlerChrysler, the $130 billion combination of Daimler Benz and Chrysler. When the deal was struck in 1998, it was described as a "merger of equals" despite the fact that Daimler Benz shareholders were paying a premium.

According to Taken for a Ride, a book by two American journalists published this month, Chrysler's managers soon discovered that Mr Schrempp was anything but a naive European venturing into America.

Mr Schrempp allowed Bob Eaton, the former Chrysler chairman who was co-chairman of the new company, to become sidelined. Mr Thomas Stallkamp, the highest-ranking Chrsyler executive after Mr Eaton, was ousted and Mr Eaton stepped down earlier than planned.

But Mr Schrempp has yet to prove that he paid a fair price for Chrysler. Shares in Daimler Chrysler have slipped gradually during the last year. The absorption of the lower margin, higher volume US business has weighed on the company's rating. Had Mr Schrempp not moved on Chrysler, though, the prospects for the company were arguably even less appealing. Daimler could have been left as one of the also-rans of the global car industry. And Mr Schrempp would have had to make do as a secondtier chief executive.

Messrs Messier, Gent and Villalonga have recently illustrated that they do not see themselves in the second division. Now they will have to prove - regardless of their outward national appearances - that they have what it takes to compete in the corporate World Series.