UK urges Thomson-CSF to mount BAe challenge

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The Independent Online
THOMSON-CSF, the French defence electronics group, disclosed yesterday that the British government is actively encouraging it to create a "second force" in the UK defence industry to provide competition to British Aerospace following its pounds 7bn takeover of Marconi.

The disclosure by Denis Ranque, Thomson-CSF's chairman, will increase speculation that it plans to bid for Racal Electronics' defence arm.

Mr Ranque said that it was targetting two or three UK defence contractors as part of its strategy of forging a pan-European defence electronics and systems group. "The British government wants to use us a catalyst to provide an alternative to BAe-Marconi," said Mr Ranque. "There would be room to build up a second-tier UK company which would be linked with other European contractors."

Thomson-CSF has pounds 600m of defence sales in the UK and 6,000 employees, making Britain its biggest market outside France. The group offered to buy GEC-Marconi earlier this year but was outbid by BAe.

Mr Ranque said he knew that the British government would have preferred BAe to merge with Daimler-Benz Aerospace of Germany and GEC to join forces with Thomson-CSF. Since the "all-British" solution to defence consolidation, it had been encouraged to help shape a rival grouping.

The Thomson-CSF chairman said he would consider a UK share listing if it helped relations with the Ministry of Defence. He also said he was confident the French government would fully privatise the group. The government shareholding is falling to 33 per cent with the sale of a further 10 per cent stake to Alcatel.

He was speaking as Thomson-CSF reported an 11 per cent increase in first- half operating profits to 1.02bn French francs (pounds 102m) on sales of Ffr18.8bn.