GEC pays pounds 1.3bn for US telecoms supplier

GEC YESTERDAY made its first strategic move since the sale of its Marconi defence electronics business to British Aerospace by announcing the pounds 1.3bn purchase of a US telecommunications equipment supplier.

The acquisition of Ohio-based RELTEC is being financed from GEC's pounds 2.7bn cash mountain. The move is its first foray into the American telecoms market - the biggest in the world, accounting for half of all global traffic.

Lord Simpson, chief executive of GEC, described the purchase as "a good first step" and said the group planned to move quickly to build sales back up to the pounds 11bn level they were at before the BAe-Marconi merger.

GEC is paying $29.50 a share for RELTEC, which is 80 per cent-owned by the US buyout specialists Kohlberg Kravis Roberts. This represents two times sales of $1bn (pounds 610m) a year and a 36 per cent premium to RELTEC's closing price on Friday.

Once the deal is completed, half GEC's turnover will be in the US. Telecoms will represent about 60 per cent of group sales.

The RELTEC purchase will give GEC access to the "local loop" - the last- mile connection to domestic and residential customers that is growing at a phenomenal rate because of the explosion in data, video and voice traffic.

Lord Simpson indicated that GEC's next acquisition was likely to be a hi-tech US business supplying equipment for Internet access. But he also said he was keen to expand GEC's presence in Europe, particularly in the German telecoms market.

RELTEC has 6,600 employees, net debt of $490m and assets of $361m. The acquisition will lead to a goodwill charge of about $1.7bn taken against profits. GEC said the deal would be earnings enhancing from day one before goodwill.

GEC expects to achieve additional sales of at least pounds 500m by combining its transmission equipment business with RELTEC's presence in the local access market through telecoms operators such as Ameritech, AT&T and several of the US "baby Bells".

Following the Marconi defence electronics sell-off, GEC consists of three divisions - communications, information systems and a rump of businesses including its Hotpoint domestic appliances joint venture and Avery Berkel weighing machines, grouped together under the GEC Capital banner.

Although communications is likely to be the focus of GEC's growth, Lord Simpson said the group also aimed to build up the information systems division. This consists primarily of three US businesses - Gilbarco petrol pumps, Picker medical imaging equipment and Videojet, which together employ around 10,000.

Lord Simpson dismissed reports of a rift between himself and GEC finance director John Mayo as "fantasy" and "a load of nonsense". He said: "John is an exciting guy to work with who deserves a huge pat on the back. Personally, we also get on very, very well."

He said he remained hopeful that the pounds 7.7bn BAe-Marconi deal would escape referral to the Monopolies and Mergers Commission, but the RELTEC deal was not dependent on the defence merger being approved.

Outlook, page 17

Start your day with The Independent, sign up for daily news emails
Voices
Ed Miliband and David Cameron are neck and neck in the polls
election 2015Armando Iannucci: on how British politics is broken
News
i100
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
health
News
science
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
News
Chuck Norris pictured in 1996
people
ebooks
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
News
A voter placing a ballot paper in the box at a polling station
i100
News
people
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Sport
football
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power