Magazine article Global Finance

The Americas: ADRs Playing Takeover Role

Magazine article Global Finance

The Americas: ADRs Playing Takeover Role

Article excerpt

American depositary receipts are being used more frequently than ever by European companies to fund takeovers of US and Canadian entities.The trend to use ADRs as the acquisition currency in cross-border mergers is continuing and accelerating, according to a report by J.1? Morgan.

Two huge deals this year-Deutsche

Telekom's bid for VoiceStream Wireless, valued at $53.9 billion, and Vivendi's proposed acquisition of Seagram for $34 billion-are structured principally as stock-swap mergers with ADRs as the acquisition currency. Contributing to the success of such transactions is the existence, prior to the offer, of active ADR programs, J.P Morgan says.

"Such programs provide a liquid instrument and transparent pricing for investors," the report says. "Also important to these deals from the investor standpoint is that ADR exchanges are often structured as tax-free Ii stock swaps." The total value of these deals in the past few years is roughly equal to 40% of the ADR market's total capitalization. …

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