As the year turns two pieces of unrelated news may turn out to be part of the same fabric. Kuwait has announced that its sovereign fund will begin to cherry pick US companies that have suffered from the current credit crisis. According to the FT "the Kuwait Investment Authority is following its peers in the Middle East in the hope of finding bargain investments in the US in the wake of the subprime mortgage crisis."
Kuwait may be late to the game, but with further write-offs likely at investment houses and banks as the fourth quarter is reported, there will be ample opportunity for further funding.
Over in the tech sector, Bain Capital and Huawei Technologies, a Chinese telecoms equipment maker, have been trying to buy and break up US company 3Com (COMS). But, 3Com supplies intrusion prevention technology to the US defense department. The Committee on Foreign Investment in the United States is probing whether the deal will be in the best interests of US security.
For 3Com investors the investigation is decidedly bad news. The company is a financial dog which loses money and traded as low as $3.22 this year. They buy-out news has pushed it up to $4.52.
Wall St. is now going to have to add a new factor when its gambles on which buy-outs or significant investments foreign companies and funds can make in the US. AMD (AMD), a large chip maker, took $622 million from Dubai. Some American financial companies may not remain solvent if they do not get new infusions of capital. It is easy to say that minority interests and non-voting shares allay concerns about strategic assets. But not all deals will be based on those formulas.
The new wave of capital from Asia and the Middle East raises the issues of whether shareholder interests will be undermined by a federal government which is willing to meddle in investment activity if it deems any of those investments to be contrary to the country’s best interest.
From now on Congressmen will decide what US public companies are worth.
Douglas A. McIntyre
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