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Wednesday, 19 September, 2001, 20:06 GMT 21:06 UK
Attacks scuttle business deals
World Trade Center remains
The WTC attacks have put many business deals on hold
By BBC News Online's North America business reporter, David Schepp

The chaos created by the attack on the World Trade Center has put a stop to some high-profile business deals in the US.

Among the first to make an announcement was giant insurance firm Berkshire Hathaway, run by billionaire mogul Warren Buffet.

Warren Buffet, CEO, Berkshire Hathaway
Billionaire Warren Buffet has scuttled a deal to buy $500m in bonds
The company said on Monday that it would not go ahead with its planned purchase of up to $500 million in bonds from troubled financial-services firm Finova.

Berkshire cited Wall Street's decision to halt trading for four days following the attacks as well as the attacks themselves. In doing so, the firm utilised a little-known clause that allows buyers to back out in the event of an act of war or a calamity.

Few analysts see any repercussions for Berkshire's actions, saying the clauses offer purchasers broad protection.

"If this isn't a calamity, I don't know what is," said a principal in a law firm involved in such deals who asked not to be named.

Uncertainty over GM sale

The world's largest auto maker General Motors said on Tuesday that a sharp drop in the share price of its Hughes Electronics unit would make the sale of the satellite-television unit difficult.

Shares of Hughes have fallen around 13% since trading on the New York Stock Exchange resumed on Monday.

The front of the New York Stock Exchange following World Trade Center attacks
US stock markets remain uneasy in the wake of attacks
The stock's tumble also has the potential to harm GM's credit ratings, which were already reeling prior to last week's attacks.

Rating-firm Standard & Poor's warned on Tuesday the attacks could harm not only GM but also fellow auto makers Ford and DaimlerChrysler.

The deterioration of the industry giants' credit rating would make obtaining financing more expensive and difficult.

Other deals affirmed

On the other hand, Hewlett-Packard has said its deal to acquire rival computer maker Compaq Computer is still on. On Wednesday, HP resumed its buyback of its shares under a plan issued by the Securities and Exchange Commission that allows companies to purchase their own shares in the event of a national emergency.

A number of other firms have also said they would buy back stock, including soft-drink maker PepsiCo and drug-maker Pfizer.

And in the first merger announcement made since the World Trade Center and Pentagon attacks, American Water Works, an investor-owned water company, has agreed to be acquired by German-based utility company RWE.

Other deals going ahead include General Motors' purchase of Korean auto maker Daewoo in which GM would acquire all 30 of Daewoo's overseas units.

Dean Foods, a large dairy producer, said on Wednesday its shareholders approved its merger with Suiza Foods, the largest dairy concern in the US.

Suiza shareholders will vote on the deal 21 September. Barring objections from the Department of Justice (DoJ) the merger is set to close at year-end.

Stock floats on hold

Amid the uncertainty over the military response by the US as well as the nation's uncertain economic future, some firms' stock floats have been put on hold.

While just three firms have put their plans to "go public" on hold this week, others are not ruling out the possibility.

All new stock floats scheduled for this week and next have been put on ice. And the investment banks that put the deals together have yet to disclose when or if the offers might get underway.

"It's going to take a full week before [Wall] Street gets back to speed," said Michael Tiedemann, head of equity syndicate at J P Morgan.

Among those forgoing stock floats, Continental Airlines, which announced it would layoff 12,000 workers, has postponed its $320m float of its ExpressJet unit.

Information-technology educator Global Knowledge and software-service provider Stream International have also mothballed their plans to float stock.


In DepthIN DEPTH
US under attack
Disaster as terrorists hit US
See also:

19 Sep 01 | Business
Wall Street shares drop sharply
19 Sep 01 | Business
Fears grow for US economy
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