Europe approves pounds 1.4bn French state aid for Bull

THE European Commission yesterday approved state aid worth Fr11.1bn ( pounds 1.4bn) for the loss-making French computer manufacturer Cie des Machines Groupe Bull.

The decision, which has angered competitors and cheered the French government, was followed by an announcement from the Industry Ministry in Paris that it would be seeking private investors within weeks.

'The government hopes to conclude this privatisation in the next few months,' a spokesman said.

SG Warburg and Banque Indosuez are advising the French government on the sale of its 76 per cent stake. Warburg is likely to earn huge fees from what appears to be a highly complicated privatisation programme.

Decisions have yet to be made about the timetable, but it has been decided that industry partners will be sought to invest in each of Bull's six operating divisions. It appears this will not be a public flotation.

Possible partners include IBM and NEC, the Japanese computer company, each of which already owns a small holding. It is thought the government is looking for three or four partners to take stakes of about 20 per cent each.

In approving the deal for Bull, which has already benefited from a similarly contested pounds 964m aid package, Karel van Miert, the Commissioner responsible for overseeing European competition policy, stressed that the decision had been taken in accordance with strict criteria and would be the last such award to Bull.

The Commission warned that if the criteria were not strictly applied it would take action to ensure all aid was repaid.

In Britain, the Department of Trade and Industry said it was concerned and disappointed. 'Aid to a major producer merely intensifies the problems faced by unaided competitors,' a spokesman said. The implications of the aid on Bull's acquisitions could risk distorting other industry sectors.

ICL similarly argued that 'such an award distorts any attempt to build a level playing field for the computer industry'.

The aid was approved on condition that it helps to finance the company's previously announced restructuring plan. The firm must be restored to profitability within 'a reasonable time' and the Commission must be allowed to monitor progress.