U.S. Approves Boeing-McDonnell Merger
The U.S. government Tuesday unconditionally approved the $14-billion merger of Boeing Co. and McDonnell Douglas Corp., helping to clear the way for creation of the world’s largest aerospace company.
The Federal Trade Commission agreed 4 to 1 not to challenge any aspect of the deal, but gave important support to the strongest objection raised by Europe.
Attention now turns to Brussels, where the European Commission will vote July 23 on whether to approve the combination, a Boeing spokeswoman said. She said the companies expect approval.
Boeing and McDonnell Douglas announced they will hold shareholder meetings July 25, merge on Aug. 1 and begin operating as Boeing Co. on Aug. 4.
“We deeply appreciate the professional manner in which the FTC handled this process,” said Boeing Chairman Phil Condit.
Critics have expressed concern that the merger will narrow the playing field for commercial aircraft manufacturers from three companies to two: Boeing and the European consortium Airbus Industrie.
But the four commissioners said McDonnell Douglas was no longer a competitive force in the commercial aircraft market.
“There is no economically plausible strategy that McDonnell Douglas could follow, either as a stand-alone concern or as part of another concern, that would change that grim prospect,” they said.
Commissioner Mary Azcuenaga disagreed, arguing: “The evidence shows that Douglas has added an element of competition at the stage at which commercial aircraft producers bid for the business of airlines and it has continued to win some business.”
Azcuenaga, who was in Brussels this week for meetings with the European Union, did endorse the combination of the military components of the two companies.
McDonnell Douglas is predominantly military, while Boeing is predominantly commercial. The combined company will surpass in size Lockheed Martin, now the world’s largest aerospace company.
Boeing shares rose $1 to close at $54.06; McDonnell shares gained $1.19 to close at $69.69. Both trade on the New York Stock Exchange. Although the FTC took no action, it backed the EU view that Boeing’s exclusive provider contracts with Delta Airlines Inc., AMR Corp.’s American Airlines and Continental Airlines Inc. were “potentially troubling.”
European Union Competition Commissioner Karel Van Miert has said repeatedly that the merger could not be approved as long as Boeing continued the exclusive sales agreements.
Boeing has shown flexibility on that issue in negotiations with the EU, sources say.
“I think there was a sense that something like this can become a political issue and spin out of control,” said Byron Callan, an aerospace analyst for Merrill Lynch.
The FTC statement further nudges Boeing in that direction, leaving little distance between the views of competition authorities in the United States and the EU.
On Friday, EU competition authorities will share their proposed recommendations on the Boeing-McDonnell Douglas deal in a closed meeting with competition officials from the 15 EU member nations.
The new combined company will have about 200,000 employees and operate in 27 states with estimated 1997 revenue of $48 billion.
