Marconi buys German telecoms company
Friday 26 November 1999
The deal, unveiled four days before Marconi sheds its old identity as GEC and joins the Information Technology sector of the London stock market, helped to propel its shares 11 per cent higher to 880p. The shares have doubled in value in the past 12 months.
The Bosch purchase will result in 300 job losses in Germany. Lord Simpson, Marconi chief executive, said the restructuring had been agreed with Bosch's unions and would not lead to mass protests of the type Vodafone is encountering.
The deal came alongside better-than-expected interim profits, bolstered further by the acquisition over the spring and summer of US telecoms equipment makers Reltec and Fore Systems.
Stripping out the defence arm - Marconi Electronic Systems, which has been sold to British Aerospace - operating profits rose by 51 per cent to pounds 299m on sales up by 40 per cent to pounds 2.5bn.
Lord Simpson said Marconi had the financial firepower to fund another deal like the pounds 2.8bn Fore Systems purchase, but a series of smaller bolt- on acquisitions was more likely. He ruled out becoming a telecoms operator, notwithstanding the purchase of a 27 per cent stake in Atlantic Telecom, the Scottish wireless telecoms business, earlier this month.
On completion of the BAe deal, Marconi will have a market capitalisation estimated at about pounds 17bn, net debt of pounds 1.8bn and shareholders' funds of pounds 4.6bn, giving it a gearing of 40 per cent.
The gearing will fall with the disposal of its three unwanted businesses - Woods, Avery Berkel and Easams - by March. Marconi also intends to sell its remaining 23 per cent stake in the power engineering group Alstom during the next few years.
John Mayo, Marconi's finance director and the co-architect of its move out of defence and into high-growth telecommunications and Internet markets, denied that he was contemplating taking up a chief executive position elsewhere. "Where else would I want to be? This is the most exciting technology company in Europe," he said.
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