The European Commission has blocked the proposed 41 billion dollar acquisition by General Electric Co. of Honeywell Inc. It is only the second time the Commission has prohibited a merger involving only American firms.

Seventy two hours before the decision was made, Honeywell chairman and ceo Michael Bonsignore had sent a letter to GE chairman and ceo Jack Welch, proposing solutions designed to satisfy concerns of both GE and the European Commission regarding the companies’ pending merger.

Welch replied: “The GE-Honeywell proposals of both June 14 and June 27 fall far short of what the Commission seeks. What the Commission is seeking cuts the heart out of the strategic rationale of our deal.

“The new deal you propose makes no sense for our share owners, for the same strategic reasons.”

Following this rebuff, European competition commissioner Mario Monti announced the Commission’s decision, saying: “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.

“However, there were ways of eliminating these concerns and allowing the merger to proceed. I regret that the companies were not able to agree on a solution that would have met the Commission's competition concerns.”

A retaliatory statement by General Electric read: “The Commission took a fundamentally different approach to competitive issues than its counterparts in the US, Canada and nearly a dozen other jurisdictions, which approved the acquisition with few, if any conditions.

“We strongly disagree with the Commission’s conclusions about the competitive effects of GE’s acquisition of Honeywell and its statements about the market position and influence of GE Aircraft Engines and GE Capital Aviation Services.

“The facts just don’t support these assertions. We believe this acquisition would have clearly benefited consumers in terms of quality, service and prices.”

Bonsignore retired shortly after the decision was made, although spokesman Tom Crane told EBAN that this was already planned and not as a result of the failed merger. Honeywell has since appointed Lawrence A. Bossidy as his successor.

Board member Robert P Luciano said: “The Board would especially like to thank Mike for his leadership and contributions during the AlliedSignal/Honeywell merger through its proposed merger with GE.”

Bossidy added: “It is time to leave behind the distractions of the past several months and to immediately implement a laser-sharp focus on consistently meeting our financial commitments and our customers’ needs.”

This is only the fifteenth time the European Commission has blocked a merger since September 1990, when it became the one-stop shop for mergers and acquisitions requiring regulatory approval in the European Economic Area.