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The Associated Press

STRASBOURG, France (AP) — The European Union has blocked General Electric Co.’s $41 billion purchase of Honeywell International Inc., the first time a proposed merger between two U.S. companies has been blocked solely by European regulators.

The veto earlier this week of one of the world’s largest industrial mergers by the EU’s 20-member executive Commission was widely expected after the American companies failed to allay European fears the deal would create an unfairly dominant position in markets for jetliner engine and avionics.

“The merger between GE and Honeywell, as it was notified would have severely reduced competition in the aerospace industry and resulted ultimately in higher prices for customers, particularly airlines,” EU Competition Commissioner Mario Monti said in a statement.

The Commission’s decision was unanimous. It came after a one-hour meeting during which Monti presented the issues to his colleagues.

EU officials, who spoke on condition of anonymity said both companies were notified immediately after the decision.

The companies’ plans now were not immediately clear. GE could either challenge the decision in court or file a new application and start the process all over again. But many believe the deal is dead.

To do business in Europe, U.S. companies must comply with EU law just as European companies must abide by U.S. law to do business in America.

However, the EU’s objections to a deal that had already secured regulatory approval from U.S. antitrust authorities has raised American hackles.

U.S. senators accused EU regulators of protectionism and warned of a possible “chilling effect” on trans-Atlantic relations. Even President Bush expressed concern.

EU officials point out that trans-Atlantic antitrust cooperation is generally good. As evidence, Monti noted that the two sides of the Atlantic usually reach the same decision, a tribute to daily contacts and close cooperation between the agencies.

Honeywell had offered to accept a lower purchase price, and in return asked GE to divest more of its holdings to satisfy European antitrust regulators.

As a result of the failed deal, Honeywell’s board of directors is reportedly going to oust chairman and chief executive Michael Bonsignore at a meeting Tuesday.

The Wall Street Journal reported Tuesday that his replacement will be Lawrence A. Bossidy, 66, the former chairman and chief executive of AlliedSignal Corp., which in 1999 acquired Honeywell and adopted the Honeywell name.

In trading Monday on the New York Stock Exchange ahead of the decision, GE shares were up $1.20 to close at $50.20, while Honeywell shares were down 79 cents and closed at $34.11 a share.

Copyright 2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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