Outlook: A vision thing as GE leviathan consumes Sir Bill's Amersham

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The Independent Online

It's a vision thing really, or rather, a shared vision thing. Sir William Castell, chief executive of Amersham, is hardly alone in looking forward to an age of personalised medicine, when doctors can tell what diseases you might be predisposed to from your genetic make-up, or spot them through advanced diagnostic techniques at an early enough stage to treat them. This is, after all, the great holy grail of medicine.

But where he has met some scepticism is in characterising Amersham, a not obviously seamless collection of diagnostic imaging and laboratory equipment businesses, as uniquely well placed to deliver that future. Not so with Jeffrey Immelt, chairman and chief executive of General Electric, who likes the vision so much he's buying the company for a knockout price of £5.7bn.

For GE, the world's most diverse company and its second largest after Microsoft by market capitalisation, Amersham represents little more than small change. The all-share terms amount to just 3 per cent of GE's stock market value, or 12 days of typical trading volume in GE stock, which is why Mr Immelt is so confident the deal will be a hit with Amersham's UK shareholders.

Many UK only funds would be precluded from owning shares in GE, but the stock is so liquid that the offer is virtually as good as cash anyway.

Mr Immelt originally came from the medical equipment side of GE, so his interest in Amersham can hardly be seen as another casual purchase to add to GE's already burgeoning mantlepiece of trophy assets. He also wholly buys the Castell vision of personalised medicine, so much so that he's putting Sir William in charge of the whole of GE's healthcare activities and allowing them to be run out of Amersham's existing headquarters in Little Chalfont, Buckinghamshire. Furthermore, he promises to keep the whole shebang, confounding the sceptics who thought the only bit of Amersham of interest to GE would be the original imaging agents business.

This fits so neatly with GE's commanding position in diagnostic scanners that it's hard to see why the two took so long to get together. GE makes the scanners, Amersham the injectible agents which help the scanners do their job. There is no direct overlap of product, but as GE knows to its cost, the competition authorities can have a problem with bundling of sales to the same customer base, a strong likelihood in this case, as in "buy your scanner from GE and get a year's supply of imaging agents free".

GE doesn't anticipate a problem, but admits that it doesn't know quite what to expect, given that the bundling issue sunk its acquisition of Honeywell three years ago. Sir William expects that having GE as a parent will be a powerful driver of sales, taking Amersham into new markets and enabling him to push forward his vision of the ultimate diagnostics company.

No doubt he's right, and in any case, this deal is a brilliant exit for Sir William after 14 years at the helm of one of Britain's most dynamic companies. Yet he would also do well to remember, that though he may be the centre of attention today, by tomorrow he'll just be another cog in one of the world's largest corporate leviathans.

Also popped in GE's shopping basket this week alone were the film, television and theme park interests of Vivendi Universal and the Finnish medical equipment company Instrumentarium. From electricity turbines to lightbulbs and rail locomotives, and from aerospace to broadcasting and financial services, GE is the world's greatest conglomerate.

To the extent that Mr Immelt has a unifying strategy at all for such an extraordinary array of different businesses, it can only be that of discarding the lower growth, capital intensive businesses and replacing them with more innovative companies in higher growth industries. Even Sir William will struggle to explain what gas turbines have to do with personalised medicine. Then again, scanners cannot work without electricity, can they?

Did Jarvis jump from the footplate or was it pushed? Despite yesterday's claims and counter-claims, the answer is not hard to guess. Jarvis would have been tied to the line and mown down by Network Rail's Big Banana - its high-speed track monitoring train - if it had stayed any longer.

That said, the stock market did not seem to care one way or the other what the explanation was. On the basis that its exit will put an end to banner headlines blaming the company for yet another rail disaster, the shares shot up.

Jarvis may be useless at rail maintenance, but it did an excellent job yesterday convincing the City that losing 15 per cent of its turnover in one go is actually a good way of de-risking the business. Spin it was and the City fell for it. There is a good chance that Jarvis's contracts will be re-let to other rail maintenance firms, judging by the telephone calls flooding into Network Rail House. Yet investors in Balfour Beatty, Amec and Carillion were not exactly running for cover.

Rail maintenance has become steadily less profitable as Network Rail has grown more demanding of its contractors. But the real reason for Jarvis's withdrawal is a set of accidents, starting with last year's Potters Bar crash, which the company is still blaming on a mysterious saboteur, and finishing with last month's derailment at King's Cross after an absentminded Jarvis employee forgot that he had removed a section of track. Jarvis might have survived even that cock-up had it not been for the fact that it rained on the Prime Minister's parade, coming as it did on the very day the PM opened the first leg of the Channel Tunnel Rail Link. Guess which event got all the press coverage.

Jarvis may be out of rail maintenance but it is not out of rail, which will still account for more than a third of turnover for the foreseeable future. It may be the case that its other rail businesses - track renewal and the Tube - are less fraught with danger than walking the line each day to make sure no one has vandalised the points. Yet Jarvis thought maintenance too was the way to riches until it was hit by Potters Bar. Jarvis's two big rail customers, Network Rail and London Underground, are both government-funded businesses with a remit to give contractors a hard time. As King's Cross proved, it does not take much to upset the risk-reward balance.

J Sainsbury

Another Grim trading statement from J Sainsbury, which sees Britain's once-biggest supermarket chain slip further behind Tesco and the others taking great chunks out of its market share. Even Safeway, with the distraction of takeover approaches from everyman and his dog to deal with, managed to do better than Sainsbury's in the second quarter. Sir Peter Davis, chief executive, blames a fall in like-for-like sales on the disruption caused by the final stages of the business transformation plan, involving store modernisation, a new IT system, and four new national distribution warehouses.

Sir Peter is two-and-a-half years into his three-year turnaround strategy and says his only regret is in failing to let the City know quite how bad the position was when he first started. He asks to be judged on results after the three years are up, by which time Sir Peter will conveniently have quit the hard slog of the chief executive's desk for the chairman's suite upstairs.

Sir Peter promises that a new chief executive will be named by the end of the year. After these results, the successful candidate will have to be an outsider.

But for the support of the family, which still owns about 35 per cent of the shares, Sir Peter would probably not have been given as long as he has to show results. It ought to be possible to turn Sainsbury's around, but somehow or other, it just doesn't seem to be happening.