Plessey Co Plc decided early in its battle against the hostile GEC Siemens Plc bid that it was prepared to sacrifice its 50% stake in GEC Plessey Telecommunications in order to retain its independence, and on Friday, the Financial Times claimed that the company had approached GEC with the offer of a deal on the 50% stake if GEC agreed to abandon the rest of its bid, and make a long-term commitment not to make a renewed bid for the rest of the business. Neither side was prepared to comment on the report but the suggestion is that it has come up with a fair price for 50% of the business at which it would be prepared to be a seller or a buyer. The suggestion is that the price is in the region of UKP600m to UKP700m, valuing the whole of the business at UKP1,400m. The idea does have some chance of achieving Plessey’s objective of retaining its independence, albeit at the cost of the substantial premium that would be available on its GEC Plessey shares if they were to be auctioned. The conditions on ownership and structuring of Plessey’s defence businesses in order for a new bid to be approved make them significantly less attractive to the bidders, and if the reports from Siemens’ intended-to-be reassuring press conference are to be believed, the Munchener is not very excited about the prospect of adding Plessey’s chip business to its own, and doesn’t seem to be too sure of exactly what it comprises. The 40% in GEC Plessey promised to it by GEC in the event of the bid succeeding is clearly the main reason it got into bed with GEC to go after Plessey in the first place, and the amount of flak that it received over the bid in the British press may well have been enough to make it chary about going through it all again in a new bid. Even GEC must be doubtful that the cost and acrimony that a new bid will entail is worth the candle if it can achieve a substantial part of its objective and take over the telecommunications business. On the defence side, acquisition of Plessey’s businesses also has to be second best to doing deals with foreign partners on parts of its own giant Marconi defence operations, and makes little difference to the enormous Marconi operations in terms of critical mass. One difficult problem for GEC if it decided to do the deal and simply buy Plessey out of GEC Plessey Telecommunications is whether it should honourably proceed with its original plan of selling new shares representing a 40% holding to Siemens, or do what would arguably be its fiduciary duty and maximise shareholder value by putting the 40% holding up for auction to the highest bidder. At the cost of making an enemy for life of Siemens, the latter course would have some emotional attractions, since, having ostensibly been bested again by Plessey, GEC could then mock the Plessey board for having failed to get its own shareholders full value for its 50% of GEC Plessey.
