More now on the weakening dollar

Firms in Takeover Danger

More now on the weakening dollar. One of Canada’s leading banks, Toronto Dominion, known as TD, bought New Jersey’s Commerce Bancorp for $8.5 billion. Yesterday, the Finnish company, Nokia, bought Chicago’s Navteq for $8.1 billion. firms. dollar is so weak.

DAVIDSON: The dollar is so weak that Commerce Bancorp in New Jersey must have looked like a steal to Canada’s Toronto Dominion. dollar, the Canadian Loonie just reached parity. like it’s one, big fire sale, right?

Mr. BRAD SMITH (Analyst, Blackmont Capital): This is not a fire sale price. This is a premium price for what management views as a strategic imperative. market. In other words, this deal is the result of long term strategy, not any short term currency fluctuation. asset?

Mr. You know, they spent a lot of money buying these guys. Nokia has done great as a hardware maker mostly of phones. But to expand their business, Gold says, Nokia needs more and better content. So, they bought Navteq, which is http://www.cheapjerseys11.com/ one of the world’s leading digital mapping companies. The Euro has gained around 11 percent in the last year, so Nokia got to buy Navteq at a nice discount now versus 12 months ago.

Mr. GOLD: But if they had cheap jerseys bought them a year ago, the valuation probably would have been 50 percent less just because Navteq wasn’t as big and wasn’t making as much revenue.

DAVIDSON: The point that Gold and Smith are making is that currency valuation is only one factor that companies consider when deciding whether or not to buy another firm. The main thing is strategy. Does the acquisition fit into their long term business plans? Then, there are a host of other issues. How much debt does the company carry? How good is the cultural match and on and on.

Gene DuPrez is a consultant with IBM. He advises big companies on whether or not to buy other companies. dollar ranks among the top 10 issues companies consider before an acquisition.

Mr. GENE DuPREZ (Consultant, IBM): It has not been a top 10 issue in the analysis that we have done, for the most part.

DAVIDSON: It’s not that the dollar’s decline doesn’t matter, DuPrez says, it’s just that so many other things matter so much more.

Adam Davidson, NPR News, New York.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary.

How does the dollar’s free fall on world currency markets affect you? That depends on who “you” are. Below is a guide to whether a weak dollar is cause for celebration or despair.

If You Are. A Wal Mart shopper slight despair, but not much. Many of the goods sold at Wal Mart and other discount stores are made in China, and the Chinese currency, the yuan, is, in effect, pegged to the dollar. So the weak dollar has little effect on the price of goods sold at those stores.

If You Are. A worker at a Boeing plant celebration, with one caveat. The weaker dollar means foreigners can buy more of what you make. That new Boeing 787 is now a lot cheaper for someone paying for it with euros or other currencies. firms vulnerable to a foreign takeover, because the firms themselves are also cheaper.

If You Are. A commuter driving a gas guzzler despair. A weak dollar means higher oil prices and, therefore, higher prices at the pump. Why? Those oil rich sheiks get paid in dollars, and the dollar doesn’t go as far. So the market price adjusts to compensate it’s already near a record high of about $80 a barrel.

If You Are. An American tourist vacationing in Paris despair. Your dollar buys fewer euros, so brace yourself for $7 cups of coffee and $50 taxi rides across town.

If You Are. An American consumer with a taste for French wine and German cars despair. You can expect to pay more for your BMW and Beaujolais Nouveau as manufacturers raise prices to compensate for the weak dollar.

If You Are. A German tourist in New York celebration. Your euro buys many more dollars than it once did, so everything seems cheaper. It’s as though all of America is on sale.

Leave a Reply