The premature disclosure over the weekend from Lazard Brothers & Co that a company, Metsun Ltd, had been formed under the chairmanship of retiring Westland Plc chairman Sir John Cuckney that may or may not lead to an offer for GEC Plc predictably sent the GEC share price soaring yesterday morning, and it opened 28 […]
The premature disclosure over the weekend from Lazard Brothers & Co that a company, Metsun Ltd, had been formed under the chairmanship of retiring Westland Plc chairman Sir John Cuckney that may or may not lead to an offer for GEC Plc predictably sent the GEC share price soaring yesterday morning, and it opened 28 pence up at 230 pence. The announcement was triggered by the increasing activity in the GEC shares all last week as people got wind of something on the way, and by the discovery by GEC that one of its bankers, Barclays Bank, had agreed to syndicate UKP3,500m of financing for a consortium that had still to be formed. The instant resignation of GEC chairman Lord Prior from the board of Barclays and the removal by the company of its business from the bank were in true GEC style – but that same GEC style looks likely to give any consortium bid for the company a fair wind if the government decides that a Monopolies & Mergers Commission examination of any bid is not necessary. Because while there is widespread agreement that restructuring of the UK – and European – electronics industry is greatly to be desired, there are few people in positions of power and influence who believe that GEC should end up running any more of it than it does already. The names that have been bandied about as likely members of the Metsun consortium are STC Plc, Thomson-CSF SA of France and AT&T Co and General Electric Co of the US. And Plessey itself, of course: the fact that Sir John Clark is quoted as saying that Plessey, advised in its defence against the GEC Siemens Plc bid by Lazards, only learned of this development late on Friday night when Lazards advised us they were putting out a statement seems a little hard to credit. But as to the list of potential partners, STC and AT&T seem to be mutually exclusive: while the GEC defence interests would be attractive to STC, the company is 27%-owned by Northern Telecom Ltd of Mississauga, Ontario, and Northern Telecom has to be vitally interested in getting a foot in the door at GEC Plessey Telecommunications Ltd – and that is the only part of the GEC business that is of serious interest to AT&T. GE, if it does participate, would presumably be interested in GEC’s heavy engineering, transport and medical electronics interests, which, with regard to the first two makes the whole affair rather embarrassing for Alsthom SA of France, which has just agreed to a combination with those very parts of GEC, and will find it difficult to turn round and join a group of predators attacking a company with which it is supposedly friendly – especially as it will have no idea whether any consortium bid will win.
Decidedly flaky The chauvinistic talk about Thomson being an unacceptable partner for Plessey and/or STC on the Marconi defence interests seems a little over the top given that Siemens AG has apparently been seen as an acceptable co-owner for Plessey’s defence interests yet when it comes to defence issues, the West German government is seen as decidedly flaky from the UK government’s viewpoint, whereas the French are very definitely not. But then all the talk of another Westland is very largely a co-creation of the Observer, the Guardian and the BBC in partnership with opposition politicians desperate for an issue with which to unsettle the government. But anyway, it seems likely that announcement that a consortium is being assembled will cause other would-be players to show their hands, and by the end of this week, GEC could be facing a challenge not from just one consortium but perhaps as many as three – one other serious one and a silly one. And if, as seems very likely, the whole affair is passed to the Monopolies & Mergers Commission, all the bids automatically lapse, and Plessey will gain perhaps six months’ breathing space to pursue the further international alliances that were a major plank of its strategy before the GEC Siemens bid appeared, and to make itself a much more difficult target for GEC even if the Commission does not come out against the GEC Siemens bid. And a referral of t
he bids is likely to be enough to persuade Siemens to wash its hands of the whole affair, which has turned out to be much too acrimonious for the Munchener’s liking. But if there is no referral, GEC would not seem to have a snowball’s chance in hell of persuading its shareholders to reject an offer of around 300 pence per share: its performance has been much too dull.