Carol Reed/PARIS
Denis Ranque, Thomson-CSF's new chairman, has pledged to find a strategic international partner, with GEC high on the list of favoured candidates
Ranque was in buoyant mood as he unveiled a threefold increase in the group's profits for 1997, arguing that the French group is now in poll position to lead the restructuring of Europe's defence electronics industry. Thomson-CSF is still in discussions with Alcatel, Aerospatiale and Dassault Electronique over restructuring in France, but Ranque says that this is just the first step in a wider European consolidation.
Ranque signals his intention to begin reining in the "patchwork" of alliances and joint ventures built up by Thomson-CSF over the past decade in areas such as combat systems, airborne radar and missiles.
"There is a limitation to the multi-partner approach," he says, adding that the group is gearing up to find an "ideal" partner. He concedes that GEC would be a natural ally, providing opportunities for horizontal integration in defence electronics. "The position is that we have mutual respect for one another which makes it easy to start talking," says Ranque, who was himself instrumental in forging the Anglo-French sonar venture with GEC-Marconi.
He is quick to concede, however, that GEC has other options. The UK group, which has built up a multi-billion pound cash pile, is believed to be actively interested in a US merger or acquisition, strengthening its existing avionics and communications base in North America. In Europe, GEC is also close to tying up a deal with Italy's Alenia Difesa to expand its missile, naval, ground-based radar and command systems businesses.
Ranque signals that Thomson-CSF itself will be looking for acquisitions over the next year, backed by its new-found financial strength. The group emerged a the end of 1997 with no debt and a cash pile of Fr8.7 billion ($1.4 billion). Net profits climbed to Fr2.1 billion ($345 million), helped by the sale of the group's SGS semiconductor affiliate and a surge in international business. Overall sales climbed more than 6% to Fr38.5 billion, as international business offset an 18%fall in domestic revenues. The backlog ended the year at a record Fr72.9 billion and new orders were up 30% to Fr43 billion.
Among the candidates being tipped for acquisition is the optronics joint venture with Pilkington in the UK, but other options include stakes in Spain's Indra and Italy's Elettronica, as well as ventures with Siemens, Shorts, and GEC.
Ranque holds the door open for an alliance partner to take a minority stake in Thomson-CSF. "We are reaching the limit of French ownership. If we choose a global alliance it must be reflected through foreign shareholdings," he says.
The group is already on course for partial privatisation through the Aerospatiale-Alcatel-Dassault Electronique deal. Negotiations are at an advanced stage, but valuation is extremely complex, adds Raque. Alcatel and Dassault Electronique should emerge holding around 20-25%, with Aerospatiale taking 10%in exchange for their telecommunications, space and electronics businesses. The French Government's interest would fall to around 40%.
Source: Flight International