Marconi hits debt target after £121m Hotpoint sell-off

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The Independent Online

Marconi yesterday looked certain to hit its debt target well ahead of schedule after selling another of its businesses, sending its shares up 16 per cent.

The company has sold its 50 per cent share of General Domestic Appliances, which makes kitchen appliances under the Hotpoint and Creda brands, for 195m euros (£121m) to Italian Merloni Elettrodomestici. The cash, however, is not expected to materialise until next year.

Mike Parton, chief executive, said combining the proceeds from that disposal with the cash from recent sales, the company looked set to "realise our £500m cash from disposals target by March 2002".

The disposal proceeds are expected to boost cash gained from selling assets to about £531m and are expected to reduce Marconi's debt down to about £3.1bn.

As part of its rescue restructuring strategy, Marconi had said it wanted to raise more than £500m and cut borrowings to £2.7bn to £3.2bn by the end of next March.

News of the latest disposal sparked hope among the investment community that Marconi would manage to transform itself and its shares shot up 5.4p to close at 39p.

In addition, the company also said it would gain a £23m dividend comprising the yearly cash dividend from its 50 per cent share of General Domestic Appliances as well as a special fee after that venture sold off one of its businesses.

General Domestic Appliances, which makes washing machines, cookers and fridges, is a 50:50 joint venture between Marconi and America's GE. In the year ended March, it made a pre-tax profit of £36m.

The disposal of Marconi's 50 per cent share, which is still subject to regulatory approval, is expected to close before the end of the first quarter of next year.

Other assets that Marconi could sell include its printing equipment business Marconi Data Systems as well as its electronics business Marconi Applied Technologies. Its 72 per cent stake in Easynet, its 50 per cent share of a venture known as Confirmant with Oxford GlycoSciences as well as its share of a venture called Ultramast with Railtrack could also go.

Just two days ago, Marconi announced it had reached an agreement to sell Marconi Commerce Systems, its petrol pumps business, to Danaher of the US for $325m (£225m) cash. It also bought back about £150m of bonds.

The company has also raised about £43m by selling shares in Lagardere, another £45m by selling stock in both Lottomatica and Siemens Telecommunications, known as Sietel, and an extra £67m by selling certain properties.

Marconi, which is still negotiating with its bankers over to renegotiate its loan facilities, hopes to complete its financial restructuring by next March.

Analysts, however, believed the company would eventually have to mount a fund raising exercise, such as a rights issue.

"Ultimately they'll need a rights issue at some point, I imagine. I would say, however, that that wouldn't happen for another 12 months," one said.