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An influential advisory panel on June 25 unanimously backed a proposal by the European Commission to block General Electric Co.’s proposed $42 billion acquisition of Morristown, N.J.-based Honeywell International Inc., clearing one of the last remaining hurdles for a formal decision on the deal by European regulators. According to sources, one of whom was present at the Monday meeting of competition experts representing the 15 European Union member states, the Commission successfully defended its decision to block GE’s proposed purchase, after the companies failed to produce concessions sought by Brussels. The Commission, the EU’s executive agency which is also mandated with reviewing mergers, is nearing the last stages of an in-depth competition review of the proposed GE-Honeywell tie-up. By law, the Commission must consult the advisory panel before making a final decision. According to the source at the meeting, a decision is likely to be taken by the 20 board members of the Commission July 3. Talks broke down between Fairfield, Conn.-based GE and the Commission nearly two weeks ago over concessions the EU demanded to approve the deal. GE submitted a last offer, which the company knew would fall short of the Commission’s demands. That offer included divesting some of Honeywell’s most important aerospace products, valued at $2.2 billion in revenues, and a pledge to ring-fence GE’s aircraft leasing and financing unit, GE Capital Aviation Services. The concessions were intended to address a central objection the Commission raised in its review of the deal — the vertical integration that would result from the combination of Honeywell’s avionics and non-avionics products, GE’s engine-making capabilities and GE’s related aviation activities. EU regulators, however, wanted GE to further structurally separate GECAS from the parent company, perhaps by floating GECAS to GE’s minority shareholders. But GE refused to do so. Since its final offer, the company has insisted it would seek further consultation with Brussels to devise another offer of concessions, or withdraw its notification. Monday’s meeting of panel experts brings regulators closer to a final decision in what has become a highly politicized EU merger review. While there is speculation that GE may still withdraw its notification of the deal to the EU in order to avoid a legal precedent — should the companies want to strike further deals in the sector — so far, there are no indications that GE is considering an about-face. Without a withdrawal, the Commission is almost certain to formally veto the deal next Tuesday at its weekly meeting in Strasbourg, France. Copyright (c)2001 TDD, LLC. All rights reserved.

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