Talks start on pounds 1bn French nuclear bid

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The Independent Online
GEC is in talks to expand its electrical engineering empire through a possible pounds 1bn takeover of Framatome, the French state-controlled giant which built much of France's nuclear power industry.

Negotiations are about to start involving GEC Alsthom, the power equipment and train-making business which GEC jointly owns with the French electrical giant Alcatel Alsthom.

A bid for Framatome had been talked about within GEC "for many years," according to Malcolm Bates, the deputy managing director, but had been effectively blocked by the French Government, which owns a 51 per cent controlling stake. The opportunity became available when the French authorities changed their stance.

A merger would create a vast group with 90,000 employees worldwide and annual sales of almost pounds 10bn a year. GEC Alsthom is already the world's second-largest power engineering and rail firm.

Mr Bates claimed the two businesses would "make a perfect fit". Framatome's nuclear capabilities would complement the turbine and electricity transmission interests of GEC Alsthom. The two businesses already collaborate on the construction of nuclear power stations around the world.

News of the talks led to renewed speculation that GEC might want to take complete control of GEC Alsthom by buying out Alcatel. But Mr Bates denied this. "I would be interested in that but I don't think they're a seller," he said. However, Alcatel's chairman, Serge Tchuruk, is known to be keen to concentrate on telecommunications and multi-media rather than heavy engineering.

The discussions will begin immediately, involving a GEC team said to be "on standby" in Paris. They are likely to take two or three months. GEC said it was too early to put a value on Framatome, but analysts suggested it could be between pounds 1bn and pounds 1.5bn. Last year the company had made profits of pounds 80m on sales of pounds 2.3bn.

Apart from the price of Framatome, the most difficult issue is the complex shareholding structure which will result. GEC-Alsthom has a cash pile worth pounds 2bn, some of which would pay off Alcatel Alsthom's 44 per cent stake in Framatome. The other shareholders, which comprise the French Government with 51 per cent and employees with 5 per cent, would probably be paid with GEC Alsthom shares. It could mean GEC's stake in the combined group would fall below 50 per cent, though Mr Bates said he would not be concerned as long as GEC retained its current level of control.

Framatome grew on the back of the massive expansion of France's nuclear power industry, based on pressurised water reactor technology, during and after the 1970s oil crisis.

GEC believes nuclear power will expand again in the next century as fossil fuels become more scarce.