Fear of Foreigners Owning Defense Contractor : British to Investigate Possible Bid to Take Over GEC
The British government Monday announced a preliminary probe into a possible takeover bid worth $12 billion by an international consortium for Britain’s largest manufacturing firm, General Electric Co.
General Electric, which is not related to the U.S. company having the same name, vowed Monday to fight a takeover.
The government’s Office of Fair Trading said it would look into the possible bid as political pressure built on the Conservative government to block any move to let the defense and electronics giant fall into foreign hands.
“We are talking about a major British engineering company, the heart of our defense industry and the heart of our heavy engineering industry,” said John Edmonds, leader of the powerful General and Municipal Boilermakers’ Union.
‘Vague and Inconclusive’
The Office of Fair Trading was expected to recommend within days whether a bid, if declared formally, should go to the Monopolies and Mergers Commission, which has veto power.
GEC described as “vague and inconclusive” a weekend announcement that investment banker Lazard Bros. & Co. had formed a new firm, Metsun Ltd., to consider a proposal for GEC, estimated to be worth at least $12.25 billion (7 billion pounds).
Barclays Bank confirmed that it is heading a syndicate trying to raise money for an offer, which newspapers expect to involve U.S. and French firms as well as GEC’s main British rival, Plessey PLC.
Lazard Bros. is investment banking adviser for Plessey, which itself is the target of a $3 billion (1.7 billion pound) joint bid launched in November by GEC and West Germany’s Siemens AG. GEC charged that Plessey was using “ill-considered” tactics to fight the Anglo-German bid.
“This appears to be a self-interested attempt by the board of Plessey and its advisers to form a consortium to break up the GEC and thereby save Plessey, in the short term, regardless of the cost to British industry in terms of lost opportunities and lost jobs,” a GEC statement said.
Politics vs. Competition
Lazard made its announcement at a key point. On Friday, Plessey unleashed its formal defense document against the GEC-Siemens offer, on which the Office of Fair Trading must rule by the end of this week.
Stock analysts said a bid for GEC would test the government’s insistence that competition considerations and not politics were paramount in takeover policy.
They said it was unlikely the government would allow a takeover of GEC, whose Marconi defense subsidiary supplies the government through a consortium including big U.S. and French firms.
Newspapers named possible participants in a bid as U.S. firms American Telephone & Telegraph, General Electric Co. and French electronics giant Thomson CSF, as well as British telecommunications firm STC. The companies refused to comment.
Banking sources said a loan facility of $6 billion (3.5 billion pounds) was anticipated--the largest loan ever raised in a takeover bid for a British firm.
More than 50 million GEC shares changed hands on the stock exchange Monday, and the frenzied activity sent their price up 38 pence (66 cents) to 2.40 pounds at one point.
$1.2 Billion in Pretax Profit
Plessey fought off an earlier GEC takeover approach two years ago and since the GEC-Siemens bid was announced, it has talked to several international groups about a counter-bid.
Experts say predators would be interested in various parts of GEC, which employs 157,000 people and last year declared pretax profit of $1.2 billion (708 million pounds) on revenue of $9.7 billion (5.5 billion pounds).
GEC products range from domestic appliances to defense radar and avionics for British missiles and tanks.
