The French government, already acutely embarrassed by the collapse of a previous attempt to privatise the entire Thomson group, finds itself back at square one. It began the whole Thomson privatisation process early last year to block an alliance between its defence wing and GEC.
In its classically Gallic attempt to privatise the group while controlling its ultimate destiny, the French government finds itself hoist on its own petard. Paris made it clear last month that it wanted the military electronics division of Thomson to be paired with another French defence company, or other companies, as the first stage of an anticipated restructuring of the country's military-industrial complex.
It left open the possibility of a bid for its 58 per cent share in Thomson- CSF by a European company, in order to avoid upsetting the European Commission or its EU partners.
But it let it be known that other European companies would do better to stay out of the bidding and try to form strategic alliances with the reshaped French industry. British Aerospace is known to have been unhappy with this formula, fearing that Paris wished to steal a global march on its EU partners by creating a kind of France Military-Industrial Inc. A spoiling bid from GEC - if this is what it is - was not anticipated, however.
Although neither the company nor the French government would make a formal comment, it was widely reported in Paris yesterday that three declarations of intentions to bid had been received by last Friday's deadline.
One came, as expected, from the Lagardere group, owner of the Matra missiles, space and telecommunications company, which was the senior partner in the wider privatisation deal which collapsed in December. The second came from the other officially recognised French suitor, the space and telecoms company Alcatel Alsthom. The third came from GEC.
The French government must announce tomorrow which of these preliminary bids it intends to entertain. Final bids, with firm figures, must be received by 7 May. Thomson-CSF has a turnover of pounds 4bn. The government's 58.4 per cent stake is valued at around pounds 1.3bn.
In London shares in GEC rose strongly on the Thomson bid reports. They closed 7.5p higher at 383p, making GEC the best-performing blue chip yesterday.
If the French government simply refuses to accept the GEC bid the British company could complain of unfair national preference, leaving Paris to face a potentially awkward investigation by the Brussels Commission.
Sources in the French defence industry were speculating yesterday that GEC's move was tactical. They said the British company, which already shares ownership of Matra Marconi with Lagardere, and has a joint venture with Alsthom, might just be underlining its interest in further alliances with the French defence industry.
By putting in a bid, which the French government would have to handle with tact, it might strengthen its chances of making deals with whatever military-industrial structures emerge from the byzantine Thomson privatisation process.
The first attempt at selling off the entire Thomson SA group was halted in December after the French privatisation watchdog objected to the terms. Under the first deal struck by the government, the defence company would have gone to Lagardere, which would then have relinquished the ailing consumer electronics company, Thomson Multimedia, to Daewoo Electronics of South Korea.
Comment, page 23Reuse content