Three years after it offered UKP1,160m for the company on its own (CI No 329), GEC Plc yesterday fulfilled market hopes by coming back with a UKP1,700m all-cash offer for Plessey Co Plc – and this time it is indeed proposing to bring Siemens in as a partner (CI No 1,059). The proposals are being touted as a grand strategy in which GEC and Siemens will forge a series of alliances ahead of the 1992 Single Market in Europe. GEC and Siemens have formed GEC Siemens Plc to make the offer – of 225 pence a share, a 28% premium on the 175.5 pence Plessey was trading at immediately before the announcement. There is a pro-rata paper alternative of GEC Siemens loan notes for those not wanting cash for tax reasons. The GEC plan is to sell a 40% stake in GEC Plessey Telecommunications, which would ensure that the Siemens EWSD telephone exchange would become heir presumptive to whatever market share System X may ultimately gain before it is phased out; in addition, Siemens would buy a 50% stake in Plessey’s defence business and GEC would buy a 50% stake in Siemens’ UKP250m a-year defence business. The rest of Plessey would continue to operate as an independent entity in Europe – owned equally by GEC and Siemens, but in the US, GEC would take 51% of Plessey’s newly acquired defence interests in partnership with GEC Siemens. On the chip side, collaboration between the Plessey, GEC and Siemens businesses, likely leading to merger, is envisaged. No word on Hoskyns Group Plc – or the fact that GEC and Siemens are major players and arch-rivals in the power station business. There is a widespread feeling in the City that this time around, GEC has had enough nods and winks from Whitehall that it is confident that the acquisition will not again be vetoed – but GEC insists that it had no assurances from the UK Ministry of Defence, industry secretary Lord Young – who must approve GEC buying more than 15% of Plessey, or from Brussels. Although Plessey might well be prepared to sell its 50% stake in GEC Plessey Telecomun ications to the new partners, it clearly does not want to lose its independence – it at once rejected the offer yesterday, but while GEC Siemens will almost certainly have to pay more, Plessey’s only hopes are another veto or a white knight, with STC Plc most often named. Its shares rose to the 225p offer tag.
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