British, West German Joint Offer Rejected : GEC, Siemens Bid $3 Billion for Plessey
Britain’s General Electric Co. and Siemens AG of West Germany joined forces Wednesday in a $3-billion (1.7-billion-pound) bid for Plessey PLC, but the leading electronics firm, which is GEC’s main British rival, rejected the bid.
The takeover, if successful, would create a European electronics and defense conglomerate with interests ranging from radar to telecommunications and nuclear power plants.
But Plessey, a major defense contractor with U.S. interests, said in a statement shortly after the bid that the company’s board had considered it and “emphatically rejects” it. It said it was strongly recommending that its shareholders take no action regarding the offer at this stage. The rejection could mean that a battle for control of the company is in the offing.
GEC, which is not linked to the U.S. General Electric Co., and Siemens said the offer was conditioned on approval from Trade and Industry Minister Lord Young for the joint company to buy more than a 15% stake in Plessey.
GEC and Plessey are already linked through joint ventures. Siemens, which ranks third in world telecommunications and supplies more than 40% of the equipment for West Germany’s state-owned telephone company, has wanted a joint venture to strengthen itself, analysts said. But the Munich-based company cannot team up with another West German firm because of the country’s monopolies rules.
Has U.S. Operations
GEC and Siemens said their plan calls for Plessey to operate independently in Europe. GEC would acquire 50% of Siemens’ defense electronics business and 51% of Plessey’s U.S. operations. Siemens would get 40% of GEC Plessey Telecommunications, formed in 1987.
GEC Plessey owns Florida-based Stromberg-Carlson Corp. Plessey got a foothold in the American telecommunications equipment market when it bought Stromberg from United Technologies Corp. in 1982. At the time a money loser, Stromberg has become profitable and last year won a $100-million order for switching equipment from BellSouth Corp.’s South Central Bell Telephone Co.
A statement by GEC and Siemens said the bid would be launched by a jointly owned company to be called GEC Siemens PLC and was worth $4.05 (2.25 pounds) a Plessey share.
Security analysts suggested that GEC and Siemens might have to improve their offer even if the British government does not object on anti-competitive grounds.
A GEC bid for Plessey was blocked in 1986 by Britain’s Monopolies and Mergers Commission. GEC promised not to buy more than 15% of Plessey without government permission.
A spokesman at Britain’s Department of Trade and Industry said the bid would probably be referred to the Office of Fair Trading for investigation because of its size. The OFT is empowered to consider whether the bid might infringe competition or run against the national interest.
Plessey, whose products include microchips, telephone networks and defense electronic systems, including radar, merged its telecommunications business with GEC’s in October, 1987.
Analysts said the move was made to protect dominance in Britain and improve prospects abroad. Sales of the combined force, which includes equipment ranging from complex computerized telephone exchanges to cordless phones, rank eighth in the world, analysts said.
But one industry source who declined to be identified said Plessey had been working on a leveraged buyout by management and discussing a breakup of GEC Plessey with the New York leveraged buyout firm Kohlberg Kravis Roberts & Co.
