France to auction stake in Thomson

The French government has decided to invite bids for its pounds 1.3bn controlling interest in Thomson-CSF, the defence wing of the electronics giant Thomson SA.

The decision follows the embarrassing collapse in December of an attempt to privatise the entire Thomson group. The government, which has rejected pleas from the company's senior management for a stock market flotation, hopes to complete the sale of the military electronics operation by early summer.

Paris will retain an action specifique (golden share) to maintain a degree of political control over the destiny of the company and to prevent its dismemberment. It wants Thomson-CSF to be paired with other French defence companies as the first stage of an anticipated, wider restructuring of the country's military industrial complex.

Bidders are certain to include the Lagardere group, owner of the Matra missiles, space and telecommunications company, which was the senior partner in the privatisation deal which collapsed in December. Its principal rival will once again be the space and telecoms company Alcatel Alsthom, probably in association with the plane-makers Dassault and Aerospatiale.

The French treasury is said to hope that an auction, as opposed to a flotation, will bring a premium price for its 58.4 per cent stake in Thomson- CSF, now valued at Fr12bn (pounds 1.3bn). But the government, seemingly wanting the best of all worlds, also let it be known yesterday that it would like Lagardere and Alcatel (and possibly other interested parties) to co-operate in the running of Thomson-CSF.

Government sources said the flotation option had been rejected, in part because it felt the Paris Bourse, also facing the first phase of the privatisation of France Telecom, would not be able to raise sufficient funds. This argument was curtly rejected on the stock market, which has been setting new records daily for several weeks. Jerome Labin of the Pinatton company on the Bourse told Le Monde yesterday: "The market has appetite enough to eat the whole planet and, as long as the paper is good enough, it seems the cash can be printed overnight."

To sweeten the pill for Thomson-CSF management, 10 per cent of the stock of the company will be reserved for employees.

The first attempt at privatisation of the entire Thomson SA group was halted in December after the French privatisation watchdog objected to the terms.