Bankers scent victory over economic patriotism

By Sudip Kar-Gupta

PARIS (Reuters) - Capital markets forces are likely to overcome moves by European governments to protect companies from foreign takeovers, delegates at the Reuters Investment Banking Summit said, adding that France was high on the hit list.

Bankers at the summit held in London this week also said governments that fight to shield companies from globalization risk harming already sluggish western European economies.

"We're witnessing a struggle between the nation state and the market state," said Barclays Capital Co-President Jerry del Missier.

Asked if the market state would win in this confrontation, del Missier replied: "I think it has to, eventually."

Del Missier said certain European governments such as France and Germany, which have been traditionally seen as keen to protect industries and employees from overseas market forces, had to reform in the face of slow economic growth.

"I don't think they (countries in Europe) can afford to step back and not change," he said.

Morgan Stanley banker Simon Parry-Wingfield said French companies could provide opportunities for leveraged buyout (LBO) transactions, despite government plans to protect national business icons from overseas predators.

Parry-Wingfield, co-head of leveraged finance at Morgan Stanley, said a large-scale leveraged buyout involving a French company remained possible, despite likely political opposition ahead of French presidential elections in 2007.

"Where is the big jumbo deal? Right now, people will say France. There is enough focus in that sector; there are still opportunities out there," he said.

FAILING STRATEGY?

Economic protectionism has been seen around the world, from the United States, where politicians voiced concern about a Dubai group buying Britain's Peninsular & Oriental Steam Navigation Company (P&O), to Russia, where the government has put pressure on overseas oil companies operating in the region.

The French government has denied charges it has an overly protectionist economic policy.

France set up its policy of "economic patriotism" in 2005 following rumors that U.S. soft drinks company PepsiCo Inc. (PEP.N: Quote, Profile, Research, Stock Buzz) might bid for French food group Danone (DANO.PA: Quote, Profile, Research, Stock Buzz).

The ruling right-wing government has encouraged state-owned financial institution the Caisse des Depots (CDC) to buy stakes in French companies.

However, there have been signs the government is fighting a losing battle.  Continued...