Goodwill Is Bad News for U.S. Assets: Chart of the Day

Paying too much for takeovers represents a risk to the value of U.S. companies, according to Erin Lyons, a Citigroup Inc. credit strategist.

The CHART OF THE DAY tracks goodwill, or the amount by which purchase prices exceeded asset values, for companies in the Standard & Poor’s 500 Index during the past decade. Lyons had a similar chart in a report two days ago.

Goodwill more than doubled, to $247.34, on a per-share basis and climbed to 7.8 percent of assets from 5.2 percent in the 10-year period, according to quarterly S&P 500 data compiled by Bloomberg. The total dollar amount for companies in the index stands at $2.18 trillion. The chart displays per-share amounts and percentages.

“In some cases, companies are realizing that paying a high premium for acquisitions may not have been worth it,” Lyons, based in New York, wrote in the report.

Cliffs Natural Resources Inc., the biggest U.S. iron-ore producer, said last week that it will write down $1 billion of goodwill from a deal completed in 2011. Caterpillar Inc., the world’s largest maker of construction and mining equipment, disclosed a $580 million writedown earlier in January on a Chinese unit acquired last year.

Three S&P 500 companies -- Frontier Communications Corp., Nasdaq OMX Group Inc. and L-3 Communications Holdings Inc. -- have more goodwill than market value, based on Bloomberg’s data. They were among 44 companies listed on U.S. exchanges that Lyons named as potential candidates for writedowns.

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