One Plus One Equals Five

WESTERN EUROPE

The Italian government has amended taxes that discourage business mergers. In France, the Commissariat du Plan is setting up an interministerial committee to act as a sort of marriage bureau for companies that wish to get together. The British government announced last week that one task of the new Industrial Reorganization Corp. will be to sponsor "desirable regroupings." Spain's economic Development Plan calls for the "concentration of productive units." Common Market Commission President Walter Hallstein insists: "We must let more mergers go through."

From Shoes to Sugar. Such prodding has produced dramatic results:

IN BRITAIN, remarked London's Financial Times last week, it would be easy to get the impression that the country "has gone merger-mad." In the last decade, the number of corporate mergers in Britain has increased from roughly 300 a year to more than 800. Britain's takeover tycoon, Charles Clore, having brought together the shoe industry in his British Shoe Corp., has added to it the Lewis's Investment Trust, a department-store chain, for which he paid almost $180 million. The metals-manufacturing firm, Tube Investments, has bid to take over Charles Churchill, one of the biggest machine-tool makers.

IN FRANCE, Thomson-Houston took over Hotchkiss-Brandt to form the country's largest appliance producer, and the steelmaking Pont-`a-Mousson merged with the Compagnie Financiere de Suez (TIME, Jan. 28). Image et Son, a French radio-TV firm owning peripheral stations that broadcast into France, announced it was buying 30% of the Compagnie Franc,aise de Television, a research organization.

IN GERMANY, in the third big steel merger since 1964, two Dortmund steel firms, Hoesch A.G. and Dortmund-Hoerder Huettenunion A.G., merged last month, and plan to work closely with The Netherlands' Hoogovens steel firm. The two major Hamburg shipyards, the government-owned Howaldtwerke and the privately owned H. C. Stuelcken Sohn, and Siemens, the electrical-equipment makers, have agreed on a merger that may include a fourth firm; the new group would have a shipbuilding capacity of 300,000 tons annually.

IN ITALY, Montecatini and the Edison Group have combined to control 62% of Italian plastics and synthetic fibers. Italy's biggest sugar company, Eridania, is acquiring Saccarifera Lombarda, which itself recently absorbed the Bonora sugar company.

The main purpose of all the mergers is to meet American competition. Says Dr. Albrecht Dueren, general manager of the German Chamber of Industry and Commerce: "Of the 30 biggest companies of the Western world in terms of sales, only four are from EEC countries, but 23 are from the U.S." He added, "Nothing must prevent us from putting Europe in a position to compete with the Americans."

The Logic of Facts. With or without American competition, European corporations, brought up protectively to serve national markets, know they must regroup to fit the size of the Common Market and the opportunities beyond it. There is still plenty of room for small, specialized firms if they stay alert to market and technological changes. But to prosper, industries in prime areas such as autos, textiles and chemicals have to be huge enough to support the costs of modern research and development, or to raise capital for export ventures. Clearly, the best way to be huge is to merge. "The logic of the facts," says Bentz van den Berg, president of Hoogovens, "is that one plus one plus one equals five, perhaps even six."

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