GEC investors are guaranteed shares in pounds 4bn Alstom float

SHAREHOLDERS in GEC will be guaranteed pounds 1,000 worth of shares each in next month's pounds 4bn flotation of GEC Alsthom, the jointly owned power engineering and rail group.

GEC and Alcatel of France are jointly floating a majority stake in the company. The preferential allocation of shares means that up to 6 per cent of the newly quoted company, to be called Alstom, could be in the hands of GEC or Alcatel shareholders.

The minimum subscription for GEC's 120,000 shareholders will be about pounds 500. The offer will not be open to the general public in either the UK or France.

In a letter posted to shareholders this week, Lord Simpson, GEC's managing director, said that a prospectus would be published in early June providing more details about how to apply for shares.

GEC and Alcatel intend to sell a combined stake in the business of between 52 and 58 per cent. The have also made arrangements to extract an pounds 800m special dividend from Alstom, paid for out of its cash mountain of pounds 1.4bn.

In addition, GEC will raise more than pounds 1bn from the sale of a 24-28 per cent stake in Alstom. The company has not yet said how it plans to reward its shareholders following the float. Existing investors are in effect being invited to buy shares in a company they already own. Last year GEC carried out a pounds 300m share buyback and a further distribution to shareholders from the proceeds of the flotation must be on the cards.

Meanwhile it emerged that Germany's Daimler Benz Aerospace is seeking to link up with GEC and British Aerospace in a joint bid for parts of the US defence contractor Northrop Grumman.