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REWIND: International Business News #73

In this week’s REWIND of international business news, we discuss Moody’s rating of the U.S., scrutiny of pharmaceutical companies by Chinese regulators, and the approval of a merger of two U.S. companies by the European Commission.

  • After determining that the U.S. economy continues to grow at a greater pace than other countries with sovereign credit outlooks that also carry a triple A rating, Moody’s Investors Services moved the U.S. sovereign credit outlook from negative to stable and also confirmed the U.S.’s triple-A rating. The U.S. Congressional Budget Office forecasted on May 14 that by the end of the current fiscal year, the country is set to experience the smallest budget deficit since 2008, due in part to reduced government spending.  Moody’s lead U.S. sovereign credit analyst Steven Hess believes that despite Moody’s not having information about possible future actions by the U.S. government, there is “enough information on the debt trajectory at this point to make a conclusion” that U.S. sovereign credit should carry the Aaa rating. Market analysts believe that this rating indicates that the U.S. sovereign credit rating should experience a period of stability without concern of downgrade in the near future, barring any major financial issues such as the re-emergence of the debt-ceiling problem.  Despite such comments, Moody’s is quick to point out that no triple-A rating is guaranteed forever.
  • With a recent inspection of Belgium pharmaceutical company UCB by Chinese antitrust regulators, China continues to send the message to big pharma that their pricing and marketing practices are under the regulatory microscope. The UCB probe comes on the heels of bribery accusations brought against GlaxoSmithKline which Chinese officials allege have reached nearly $500 million over the past six years.  “Officials indicated that they were examining several other companies” and that “GSK was among 60 domestic and multinational companies drawn into a review this month by China’s top watchdog, the National Development and Reform Commission.” Since drug pricing has a connection to the costs of healthcare, we could expect such regulatory scrutiny to continue in the near and long term.
  • The European Commission recently approved a merger of two competing U.S. companies that each manufacture unattended payment systems. The merger between MEI Group and Crane Co. was originally held up by the EC out of “competition concerns for certain types of unattended payment systems in the European Economic Area (EEA).” To allay the EC’s competition concerns, Crane, as the company that would survive the merger, agreed to divest a range of Canadian and German products and assets, including a “coin changer product line manufactured in Germany” and a “banknote recycler and acceptor product line manufactured in Canada”. With those divestment transactions in tow,  the EC concluded that the MEI-Crane transaction as amended would not have the effect of significantly reducing competition in the EEA.