GEC TO BUILD UP DEFENCE ARM

GEC this week said it would move away from the joint venture culture and towards what George Simpson, managing director, called `an ambitious repositioning strategy’ to build defence arm GEC-Marconi into a global player. The new strategy will be based on acquisitions in areas where GEC-Marconi can create `global leadership positions’ and on improved performance, […]

GEC this week said it would move away from the joint venture culture and towards what George Simpson, managing director, called `an ambitious repositioning strategy’ to build defence arm GEC-Marconi into a global player.

The new strategy will be based on acquisitions in areas where GEC-Marconi can create `global leadership positions’ and on improved performance, simplified corporate structures and heavy investment in production, research and development.

Announcing GEC’s 1997 results, Simpson said talks were under way with Alcatel to decide the future of joint-owned rail and power group GEC Alsthom in the next three months.

He also said a `repositioning’ of telecoms firm GPT was being reviewed with co-owner Siemens.

Four options for GEC Alsthom are being considered: major restructuring, a split on product lines, a trade sale of GEC’s stake, or a flotation and demerger.

Though Siemens wants to win control of GEC’s 60% stake in GPT, for now GEC says it wants to revitalise and refocus the business, whose exports are up 29% to £332m.

GEC is bidding for Siemens’ UK defence arm Siemens Plessey, which is up for sale with all its defence electronics interests. A buyer is wanted by September. Analysts agree GEC is the most likely new owner.

`It’s a question of how much Siemens wants to pay for GEC’s GPT stake,’ said analyst Charles Armitage of Lehman Brothers. `They can do an asset swap of Siemens Plessey in return for GPT.’

GEC meanwhile acted quickly this week to quash reports that it was about to take over Italy’s Alenia Difesa, the Finmeccanica group defence firm.

On Monday GEC said `successful’ talks it is holding with Finmeccanica on cooperation in the defence sector did not involve either company acquiring the other’s defence interests.

UBS analyst Sash Tusa believes that GEC-Marconi will seek product-specific joint ventures with Alenia which will enable the Italians to retain 49-50% stakes, but allow GEC options to raise its stakes.