GEC to help merge US giants

GEC last week confirmed it was talking to French defence electronics concern Thomson-CSF as well as Northrop Grumman and Lockheed Martin of the US. The talks with the US defence industry giants are intended to give each one an alternative for achieving their £7.5bn merger, which faces opposition from the Federal Government. ‘We have indicated […]

GEC last week confirmed it was talking to French defence electronics concern Thomson-CSF as well as Northrop Grumman and Lockheed Martin of the US.

The talks with the US defence industry giants are intended to give each one an alternative for achieving their £7.5bn merger, which faces opposition from the Federal Government.

‘We have indicated that we are ready to help both companies,’ said GEC managing director Lord Simpson of Dunkeld.

GEC may acquire selected parts of Northrop Grumman to bypass regulatory opposition to the anti-competitive strength if the two merged in their current forms.

Speaking after unveiling a 7% rise in full-year profits before tax and exceptionals to £1.08bn, Simpson added that a merger with rival UK defence group British Aerospace was still an option, but he preferred to see GEC make further progress as an independent company.

He added, however, that he aims to use the group’s £5bn war chest to fund acquisitions. About £1bn of this is in cash, giving GEC the firepower to move on several major players in its core defence electronics, communications and industrial electronics operations.

GEC last year raised £1.5bn from disposals, including the recent flotation of Alstom.

Lord Simpson said that GEC’s next deals would be much larger than its £890m acquisition of US-based defence electronics group Tracor.

GEC is targeting high-tech businesses with higher margins, which would give a better return, he added.