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November 24, 2005

Alcatel confirms interest in Thales

Alcatel SA CEO Serge Tchuruk has confirmed that he is discussing tie-up possibilities with defense group Thales SA, adding to the growing speculation it could make a bid for the company.

By CBR Staff Writer

With the press speculating that Alcatel may offer $8.6bn for Thales, Tchutold the Wall Street Journal: My [preferred] route is to do something with Thales. We’re discussing with the management of Thales…Anyone in my place would do the same.

Unlike traditional takeover talk, the issue of who becomes Thales’s ultimate owner is an intensely political matter because the French government owns 31.3% of the company and is in a position to determine the outcome. Aerospace and space group EADS SA also has ambitions to own the company.

The main attraction to Alcatel is Thales Communications business, but as this represents only 20% of revenue, the interest of a communications equipment company in a defense company has baffled many observers. However, a deal would get Alcatel into the dependable market of government contracts and lessen its reliance on notoriously cyclical traditional markets.

In 2001, Alcatel held abortive merger talks with US rival Lucent Technologies, and this experience seems to have put it off the path of traditional industry consolidation, which the market would have found easier to understand than the path now chosen by Tchuruk.

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