Outlook: GEC prepares to end the suspense

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The Independent Online
"THE SUSPENSE is killing me ... I hope it lasts," says Gene Wilder in that hardy Christmas perennial, Willy Wonka and the Chocolate Factory. Now we have another Yuletide nailbiter on our hands - George and the Giant Defence Merger (subtitle: Which Way Will GEC Jump?).

Ever since Lord Simpson promised three weeks ago that he would reach a decision "soon" on who he was going to pair up with in the great defence consolidation game, the expectation has been mounting. Now that GEC has let it be known that it hopes to make an announcement this side of Christmas, the agony of anticipation has become quite exquisite.

Will it be the French, those flighty lovers who want to dominate every match? Will the bride be American - after all, transatlantic marriages are all the rage these days? Or will George finally do the decent thing and name the date with his old flame at British Aerospace, Sir Dick Evans?

The speculation has not hurt the share price - GEC stock was up another 5 per cent yesterday to 556p, a shade beneath its high for the year. BAe was dragged along in the slipstream, climbing by a similar amount.

Alas, none of the speculation gets us any nearer an answer. GEC may have tantalised us with the promise of an early denouement which accompanied its interim results. But it also sent up enough chaff to confuse the stealthiest truth-seeking missile.

An American merger would make sense because GEC knows the terrain, having already snapped up Tracor for pounds 800m, and - more importantly - because it is trusted by the Pentagon.

But a French deal also has its merits as it would give GEC a voice at the top table in the construction of the long-awaited European Aerospace and Defence Company. GEC has tried and failed before to hold hands with its opposite number in France, Thomson CSF, only to fall foul of Gallic chauvinism. But time and politics have moved on. One method of joining forces could be through its French partner Alcatel, which has a 16 per cent holding in Thomson.

But the "dream merger" of GEC and BAe is the one that whets the appetite. There are formidable hurdles to jump - the vexed question of valuation for one, and what to do with the bit of GEC that makes Hotpoint fridges for another. There is another snag, which is that Sir Dick is betrothed to Manfred at Daimler Chrysler Aerospace.

The British government would rather like to engineer a menage a trois between all three companies. Perhaps we shall not have to wait long to see.

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