The presence of Sir John Cuckney as chairman of Metsun Ltd and would-be managing director of GEC Plc is about the only feature of the putative Lazard Brothers & Co consortium bid for GEC that prevents it being dismissed as the silly bid for the company we referred to yesterday. The idea behind the consortium appears to be that on taking control, it would distribute much of GEC’s UKP1,440m cash mountain to shareholders, sell GEC Plessey Telecommunications to STC Plc – with Plessey also selling its 50%, and sell Marconi to Plessey with Thomson CSF SA joining Plessey as a minority partner in the business. And as well as some cash, GEC shareholders would receive shares in Metsun, which no doubt would rename itself something more like GEC and continue to run most of the other GEC businesses, perhaps selling off consumer durables and medical electronics to General Electric Co or other US companies. STC is said to be wondering where it would find the money for the telecommunications business, but the company vitally interested in the destination of GEC Plessey that seems to be ignored in all the commentary is the Canadian, Northern Telecom Ltd, which owns about 27% of STC although it has agreed to sell its stake down to just under 25%, and must be sufficiently interested in the entree GEC Plessey would give it into the UK market to find some way of helping STC out with the financing. Because whatever the outcome of all the bids, real or mythical, one result of the quadrille has to be that GEC Plessey Telecommunications gets a major foreign partner, and there are only about six companies that fit the bill – AT&T Co, Northern Telecom, L M Ericsson Telefon AB, Siemens AG, NEC Corp and Alcatel NV – and the association is only of value to any if it is the only one involved. The worries about the threat to jobs among the trades unions and MPs with marginal constituencies that host GEC plants are substantially overstated because the one shining achievement of Lord Weinstock as managing director has been to run GEC as a very lean ship indeed, so that the prospects for driving the GEC assets a lot harder, and cutting fat are minimal. And that is the drawback to the idea of handing existing GEC shareholders new shares in what they already own especially since most of the businesses where with more imagination than the present GEC management has shown, there is unrealised growth potential are the very ones that the Metsun team has indicated it will sell. Indeed the businesses it appears to intend to keep are the very ones that Lord Weinstock is best suited to continue to run – mature, slow-growth, cash generative businesses that do not require high-risk investment in research and development to prosper. So the plan does seem to come very close to being silly. Then there might be a rival consortium bid organised by N M Rothschild & Co with GE as the lead player and offering all cash for GEC, with Lord King of British Airways Plc as the helmsman with the gravitas to take on Lord Weinstock. Or there might not. And many would regard the idea of GE taking control of GEC a little silly as well.
