Corporate Mergers Headed For Record Total Value Could Hit $700 Billion In ‘95, A Big Increase From $575 Billion Last Year

Corporate marriages, propelled by high stock prices, ready financing and rising economies, are poised to shatter the record for mergers set last year.

Global mergers and acquisitions totaled $564 billion in the first nine months of the year, a 43 percent increase from a year earlier and just shy of the $575 billion in 1994, the full-year record, according to preliminary information from Securities Data Co., a Newark, N.J., company that tracks mergers.

“You could be looking at $700 billion worldwide” for mergers this year, said Bruce D. Fiedorek, the chief of mergers at Morgan Stanley & Co., the leading adviser in acquisitions this year, with 119 transactions valued at $108 billion.

“It’s a hell of a year,” said Arthur J. Reimers III, Goldman, Sachs & Co.’s top mergers partner in London. Goldman ranked second in mergers this year, working on 116 transactions valued at $93 billion.

The break-neck pace of corporate acquisitions is being fueled by low interest rates, increasing competition and changing regulations, investment bankers said. Meanwhile, record high share prices give companies the currency they need to pay for purchases in stock-for-stock mergers.

Chemical Banking Corp. and Chase Manhattan Corp. agreed to an $11 billion stock swap merger that will create the biggest U.S. bank.

Walt Disney Co. is paying for its purchase of Capital Cities/ABC Inc. with $19 billion of stock and cash.

Upjohn & Co. and Sweden’s Pharmacia AB will merge in a stock swap that will create the world’s ninth-largest drug maker with market capital worth $13 billion.

And those are just examples from the third-quarter. They’re puny compared with the planned $30 billion stock swap by Bank of Tokyo Ltd. and Mitsubishi Bank Ltd. that will create the world’s largest bank.

In many cases, one merger can inspire acquisitions throughout an industry.

Disney’s purchase of Cap Cities/ABC contributed to Time Warner’s decision to purchase Turner Broadcasting, analysts said.

AT&T Corp.’s plan to split into three companies is expected to foster a host of telecommunications mergers. The split likely will increase competition among both local phone and long-distance companies, leading to new combinations and joint ventures, investment bankers said.

“It’s a case of transactions begetting transactions,” said Morgan Stanley’s Fiedorek.

Translation: Investment bankers don’t see an end in sight to the record pace of mergers and acquisitions.