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February 27, 1989


By CBR Staff Writer

The agreement in principle for Memorex Telex International NV to acquire National Advanced Systems Inc from National Semiconductor Corp has fallen apart and, as a result, the worst outcome from IBM’s point of view is now planned: Hitachi Ltd and Electronic Data Systems Corp will form a new joint venture company to acquire the business, and will then sell the European operations to Comparex Informationssysteme GmbH – exactly the deal that was being mooted only five days before the proposed joint venture with Memorex was announced (CI No 1,085). Under the new agreement in principle, which looks likely to go definitive this time, the new company formed by Hitachi with the General Motors Corp subsidiary will pay $398m – the complex agreement with Memorex appeared to value National Advanced at $500m (CI No 1,090) – for the business, and in the subsequent transaction, Hitachi will get a minority stake in Comparex, although BASF AG will remain the majority shareholder – Siemens AG also has a minority stake. The intention is that Comparex should pay half $199m – of the total purchase price for National Advanced, a name that will disappear once the new company is in being. Hitachi will own 80% of the new US marketing company with Electronic Data Systems providing a very skimpy US figleaf by holding 20%. But its involvement will call into question its position as IBM’s largest single customer, since it will almost certainly almost always be able to buy comparable machines more cheaply from the new company. IBM could lose twice over, because the EDS name should boost Hitachi sales. The new deal, with no forecast on when it will go definitive, looks so good for Hitachi that it is difficult to see why the Japanese company didn’t push it to fruition last time around – but it may be that the Memorex deal on paper represented more than it was prepared to pay. That deal appears to have fallen on the failure of Memorex and NatSemi to raise the necessary $250m secured on assets of National Advanced.

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