French pursue Racal

By THIS IS MONEY
Updated:

 

French electronics group Thomson-CSF has confirmed it was interested in taking over the UK's Racal Electronics, but played down reports of a bumper bid offer. Both Thomson and Racal confirmed the French company had made an approach following weekend reports that it was poised to launch a bid for the UK group. But Thomson said it wanted to distance itself from the reports which had put a £2 billion price tag on Racal.

Racal was valued on the London stock market at £1.63 billion at the end of last year, but Thomson said that at the time of its approach the Racal share price was 'significantly lower'. A takeover of Racal would give the French group control of a raft of businesses from radar and sonar systems to internet services as well as Racal's 22% stake in the UK's National Lottery operator Camelot.

A deal would also mark another step in the consolidation of defence companies across Europe and make Thomson the second biggest supplier to the UK Ministry of Defence after BAE Systems.

It is thought that as part of a deal Thomson would list its shares on the London stock market, making it easier for UK shareholders to keep an interest in the merged business. Thomson-CSF is France's leading defence electronics group, but also has interest in the civilian sector.

A sale of Racal to Thomson would also mark the final dissolution of the UK electronics company and the swan song for Sir Ernest Harrison, 73, who has been chairman of the company since 1966. Last year Sir Ernest also took back the day to day running of the company as acting chief executive following the retirement of David Elsbury.

During its near 40-year history Racal has been involved in founding or backing a number of famous British companies including Vodafone - now independent and the world's biggest mobile phone operator.

The final sell-off of the Racal group is now widely believed to be in its last stages. Last year, it sold off its telecoms business to Global Crossing for £1 billion. It has been expected to maximise returns by selling off its defence electronics business and other divisions separately and floating its internet security company on the stock market this year. Thomson has long been the favourite to buy Racal's defence business, but it is thought the two groups have been unable to reach an agreement on price.

Racal's shares were up 35p or 6.3% at 587- 1/2p in London by 12.30 when Thomson's shares were trading at 33.43 euros on the Paris stock exchange. Sources say Racal's board would favour a bid at between 550 and 600 pence per share for Racal which would value the company between £1.6bln and £1.75bln.

Racal's shares have risen from 450 pence since October 11, 1999 when the company announced its billion pound disposal of Racal Telecom to Global Crossing. Sources also said that Racal, which was approached by Thomson-CSF in November, had not been approached by anybody else.

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