Marconi to strip assets in fire sale

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The Independent Online

Marconi, the embattled telecoms giant, will this month launch a fire sale of assets in a bid for survival. The Independent on Sunday has learned that the disposals will be mapped out on 15 October when the company's new chief executive, Mike Parton, presents the City with a trading update ahead of Marconi's interim results next month.

It is understood that a "for sale" sign will be hoisted over all Marconi's businesses operating outside the telecoms area, especially those that generate little or no profit.

Shareholders and analysts will view this as Mr Parton's first and last chance to turn the business around. He was promoted to chief executive in early September after the departure of former chairman Sir Roger Hurn and chief executive Lord Simpson of Dunkeld, who most saw as the architects of Marconi's fall from grace. Chief executive elect John Mayo also departed earlier in the summer after a botched profits warning.

Just last year the company was hailed as Britain's answer to Cisco, the successful US technology company. But this year Marconi has found the rug pulled from under it as customers dried up and the telecoms sector declined, forcing Marconi to issue two profits warnings and make 10,000 people redundant.

On Friday it received another blow when Atlantic Telecom, the Scottish group in which Marconi had invested £50m, was placed in administration. Atlantic, which fell victim to a cash crisis over repayments on £200m of high-yield bonds, is the first of the new generation of telecoms companies in the UK to collapse.

Selling businesses considered to be non-core will give Marconi focus and help to reduce its debt, which stands at £4.4bn.

Already, details of possible sales are beginning to emerge. Last week, the private-equity firm Duke Street Capital said it was interested in Marconi's petrol pump business, Gil-barco. No formal offer has been made, but the news fuelled a rally in Marconi shares.

Other businesses that could be sold include Data Systems, which makes ink jets for printers, and General Domestic Appliances, a white goods business. Marconi holds a half share in GDA, whose brands include Hotpoint. Analysts believe that the only other potential buyer for the business is America's General Electric, which owns the other 50 per cent stake – a situation that would depress the price of the cash-generative business.

A Marconi spokesman said: "By the end of March we hope to have disposed of in excess of £500m. I can't elaborate on that."

Mr Parton said last month that he aimed to reduce Marconi's debt to £3.2bn by next March. Many in the City believe next week's announcement could be accompanied by plans to buy back some of its £2.2bn of bonds, which are trading at nearly half their value. If Marconi bought back half, it would wipe £600m of debt from its balance sheet.

However, Mr Parton's task of turning around the company is much tougher after the terrorist attacks of 11 September. Last week Marconi, which is listed in London and on America's Nasdaq, waned that its half-year results to 30 September could be affected as many of its customers are American businesses.

The terrorist attacks could also hamper Marconi's asset disposals as the economic gloom they have created could dampen companies' appetite for acquisitions.

One analyst, who asked not to be named, said: "When Parton does announce the disposals, he will claim until he's blue in the face that it isn't a fire sale. But this is a company whose future relies on it."

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