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Foreign buyouts raise US fears as weaker dollar drives deals

Weakened dollar has investors pouncing

Foreign firms are taking advantage of the weaker dollar to buy US companies at a record pace that is boosting investment here but also raising fears about a potential loss of jobs and autonomy.

In New England alone, 69 companies have been sold to foreign buyers in the first nine months of 2007 for a total of $30.8 billion, more than in any full year since 2000, the height of the high-tech boom, according to New York research firm Thomson Financial.

"We could be looking at the world's largest tag sale if we continue to see declines in the dollar," said Donald Klepper-Smith, chief economist for the New Haven firm DataCore Partners.

Last month, Koninklijke Philips Electronics of the Netherlands snapped up Color Kinetics Inc., a Burlington maker of lighting systems, for $714 million. Analog Devices Inc. of Norwood agreed to sell a pair of cellular product lines to Taiwan's MediaTek Inc. for $350 million earlier this month. Just this week, Australia's United Group Ltd. completed a $411 million purchase of UNICCO Service Co., a Newton company that provides cleaning services for office buildings.

When Governor Deval Patrick and a delegation of state and local dignitaries went to Lenox on Sept. 4, they used the traditional Arabic salutation of "Peace be with you" to greet the new owners of one of Berkshire County's leading companies: Saudi Basic Industries Corp., known as Sabic, paid $11.6 billion for GE Plastics of Pittsfield, the biggest overseas acquisition of a regional company in 2007.

The buyouts are sparking anxiety from New England to Washington, though their impact is complex. Foreign owners typically use acquisitions as an entry into the US market and thus may be more willing than American buyers to invest in their new holdings, some economists say. But the risk is that they might also be quicker to cut back or consolidate US operations when times get tough.

"Quite naturally, foreign companies want to play in this market," said Alan Tonelson, research fellow at the US Business and Industry Council, a trade group for small and mid-sized manufacturers. "They want leading-edge technology, and the United States is still the technology leader. But when they buy these companies, they're acquiring control over the most dynamic pieces of the American economy, and they're acquiring control over America's future."

Overseas buyouts are just one way the dollar's falling value against foreign currencies is having an impact on New England. The weaker dollar has also drawn European, Asian, and Canadian tourists to Cape Cod and Maine, made it more expensive for Americans to travel abroad, and boosted the exports of regional companies that sell high-tech equipment or medical gear around the world.

But foreign acquisitions could become the sagging dollar's most lasting legacy. Nationally, the value of this year's purchases of companies by non-US buyers totaled $257.4 billion as of this week - also a seven-year-high. The figure represents more than 20 percent of the value of all US acquisitions in 2007 through this week.

Some see the takeovers, which have been on the rise in New England for five years, as inevitable in a global economy where geographic borders matter less than the strengths and weaknesses of increasingly multinational companies. Chrysler was acquired by German automaker Daimler Benz in 1998 but resold to US private equity firm Cerberus Capital Management this year. And many of the top multinationals, such as New England's General Electric Co. and United Technolgies Corp., have headquarters in the United States.

"It's part of the overall global economic climate," said Brian Bethune, a US economist for Waltham research firm Global Insight, who said the acquisitions should be judged case by case. "Foreign companies are trying to get access to the US market, and generally that's positive. European and Asian companies tend to take a longer view, and could be more patient investors than US hedge funds."

For now, many of the overseas buyers are promising to invest in their acquired properties. The new management team at Sabic Innovative Plastics, the former GE Plastics, plans to add 75 to 100 employees to its 425-person workforce. "We're really lucky it wasn't bought by a Dow or a Dupont, because they might have moved the work from here to another one of their US facilities," said Alfred Shogry, president of the Berkshire Central Labor Council in Pittsfield.

Color Kinetics, the Dutch acquisition newly renamed Phillips Solid State Lighting Solutions, is also beefing up its 160-person workforce at offices off the Route 128 beltway in Burlington.

"Phillips is looking at us to be their global research and development center for LED-based lighting fixtures," said company spokeswoman Felicia Spagnoli, referring to the company's patented light-emitting diode technology. "We're absolutely hiring and growing right now. We have been more successful in North America than they were in LEDs, and now they want to take what we have and grow it."

But that's not always the case with foreign takeovers. French telecom equipment maker Alcatel, which bought American rival Lucent Technologies last year, said this month it will cut thousands of jobs. And outsourcing provider Caritor Inc., which has corporate offices in California but almost all its employees and operations in India, recently notified Massachusetts officials that it plans to eliminate more than a quarter of the 350 jobs at the Charlestown headquarters of technology services firm Keane Inc., which it purchased in June.

While overseas companies have been buying US businesses for years, a new element in the current acquisition wave is foreign governments, like China, Dubai, and the United Arab Emirates, investing directly in US assets. Borse Dubai, a holding company linked to Dubai's financial markets, last week unveiled a proposed deal under which it would buy 20 percent of the Nasdaq stock exchange.

Klepper-Smith said such deals may benefit investors on Wall Street. But he fears their impact on Main Street will be less benign if decisions on jobs and plant locations are made across the world in Europe, Asia, or the Middle East. "It raises some red flags and some real questions about our independence," he said.

Robert Weisman can be reached


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