ITT Corp. and France's state-owned CGE announced Monday that they have agreed to expand their joint venture in telecommunications to include the companies' cables and fiber optics businesses.
The joint venture will be the world's second-biggest telecommunications company, after American Telephone & Telegraph, and with the addition of the new units will be the largest cable manufacturer worldwide, the companies said. First-year revenue is expected to be $12.5 billion.
As previously announced, New York-based ITT will receive from CGE $1.5 billion in cash and relief of inter-company debt for its contribution. In addition, $800 million in ITT debt will be transferred to the books of the venture.
Major Turning Point
The deal to sharply reduce its financial interest in telecommunications marks a major turning point for ITT, which was founded in the 1920s as a telecommunications company and has turned into a diversified conglomerate in financial services, insurance, hotels, defense and aerospace, forest products and industrial technology.
Under the new terms, France's Compagnie Generale d'Electricite, or CGE, will transfer to the venture 65% of the shares of Cables de Lyon, valued at $362 million, the companies said. ITT will transfer to the venture Valtec, a West Boylston, Mass.-based company that makes fiber optics for cables, as well as certain electrical components activities in Europe, with a combined value of $65 million.
ITT's interest in the new company will decrease to 35% from 37%, and the interest of CGE and the European partners it is trying to line up will increase to 65% from 63%. All other terms of the agreement will remain the same.