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May 20, 1987

ERICSSON “PULLS OUT OF BIDDING FOR MARCONI ESPANA AS AT&T-PHILIPS RETURNS”

By CBR Staff Writer

L M Ericsson has reportedly pulled out of its tentative agreement to take over Marconi Espana, one of the two former ITT subsidiaries in Spain that proved such a stumbling block in the creation of Alcatel NV. The Wall Street Journal expects that AT&T-Philips may now renew the offer for Marconi that has already been rejected once by Alcatel under which it would take 49%, with the Spanish Inisel state holding company, and Telefonica, taking 25.5% each. The company is losing money at such a rate that if a buyer is not found for it, it may be forced into receivership, in which case the agreement by the Spanish government on job reductions at the other ITT unit, Standard Electrica, would likely be withdrawn, since it was conditional on an acceptable solution for Marconi. Marconi employs about 1,300 people and lost $4.8m in the first quarter of this year. Alcatel’s onerous conditions, allied with the Spanish government’s desire to preserve jobs, are the two stumbling blocks in the negotiations. Ericsson is already an established supplier in Spain, and therefore does not strictly need to get involved in the rescue of the ITT units – but Alcatel can scarecly afford to turn its back on the Spanish market, and neither wants a third player – AT&T-Philips – in the game.

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