Tuesday 02 March 1999
Then there was BMW, which is only now reaping the whirlwind of having paid pounds 800m to take Rover off George's hands. Then came LucasVarity, which underperformed from the day George left and Victor Rice arrived. Now, alas, it is no more. Maybe British Aerospace will buck the trend, but even so it has undoubtedly paid Lord Simpson a full price for Marconi.
So the chief executive of New GEC, recently ennobled by New Labour, has proved himself a very astute seller of businesses. What the market must now judge is how good Lord Simpson is at buying them.
With pounds 2.7bn in his back pocket - a bigger wad than he inherited from Lord Weinstock - and a further pounds 4bn of credit on tap, it would be easy for him to overpay. Particularly so, when Lord Simpson is plainly in such a hurry to rebuild GEC back to the same size it was before he sold the defence electronics arm to BAe for pounds 7.7bn.
The beauty of the Simpson approach is that the market never sees him coming, which reduces the risk of overpaying. Of all the targets GEC was rumoured to be gunning for, RELTEC, an American telecoms equipment supplier, was not even on the radar screen. It may be big in Cleveland, Ohio, but it is a closed book to the investment community over here, and there was not a sniff of GEC's interest on the New York market.
In these days of astronomic valuations in the telecoms sector, paying two times sales for a business which is plugged into the fastest growing sector of the market, the local loop, does not look exorbitant. For his next trick, Lord Simpson has earmarked a US high-tech business with Internet connections.
With the US accounting for half GEC's turnover and growing, and more than 60 per cent of sales tied up in telecoms, Lord Simpson could be forgiven for thinking of doing a Victor and relocating to New York. Luckily, he is too fond of travelling home to Scotland at weekends, and too mean to overpay.
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