British Aerospace is in confidential talks with Racal Electronics about a joint deal to break up Siemens Plessey.
If BAe succeeds in the purchase of Siemens Plessey, which has 2,350 UK employees, Racal would take the tactical communications division, leaving BAe the air defence and defence systems divisions.
David Elsbury, Racal’s chief executive, admitted Racal’s talks with BAe: `BAe is in discussions with Racal – it can’t just stay in aircraft.’ But Racal also said it was discussing potential deals with GEC and other firms, and no agreement had been signed with BAe.
Siemens Plessey’s three divisions employ 2,350 people in Christchurch, Dorset, Cowes on the Isle of Wight and Ilford, Essex. The sites are not division-specific and any split would have complex staffing implications.
Racal is interested in the tactical communications division as it forms 30% of the Archer consortium that will make the British Army’s Bowman radio system which could be worth up to £2bn-£3.4bn including exports.
BAe’s ambitions in prime contracting explain its interest in the air defence division which makes land and naval radars including the sophisticated Sampson phased array radar for the navy’s future Horizon frigates.
The defence systems division makes strategic command and control and communications systems.
BAe and Germany’s Dasa have mounted a joint bid for all the Siemens’ defence electronics businesses. Dasa would get Siemens’ German defence interests.
Under the Archer joint venture agreement, ITT and Racal have first refusal on Siemens Plessey’s tactical radio business if the company’s eventual buyer is deemed incompatible, for instance a competitor keen to acquire a rival’s intellectual property. GEC and BAe are considered `friendly’.
Alan Kemp, GEC Marconi’s director of corporate strategy, confirmed that defence company Rheinmetall was among German firms GEC was talking to about a joint bid for Siemens’ defence electronics businesses.