Ericsson on brink of £1.2bn Marconi deal
Swedish mobile phones giant Ericsson is expected to announce a £1.2bn cash deal this morning to purchase the major assets of British engineering group Marconi.
Marconi shareholders are expected to receive a cash pay out of £2.50 to £3 per share at the start of next year. That is close to the price shares in the struggling telecom equipment group were trading at before takeover talks were announced earlier this year. The shares closed at £3.51 yesterday, valuing the firm at £730.5m.
Ericsson, which has been turned around under the stewardship of chief executive Carl-Henric Svanberg, is to acquire Marconi’s network equipment business, including research and development operations and its data networking business in America. Marconi will continue to operate as an independent business in Britain retaining its services business that has annual sales of about £350m.
According to news agency reports last night the price tag includes the £700m the Pensions Regulator said Marconi must use to meet pensions liabilities. Marconi must commit £200m to the pension fund immediately after the deal.
Ericsson was not the only suitor. Earlier, Marconi held talks with Chinese technology group Huawei. A pension deficit issue, estimated to stand at anywhere between £100m and £500m, was thought to have deterred bidders. Alcatel of France was also linked to a bid. By swallowing Marconi, Ericsson will bolster its fixed-line operation. To date it has concentrated on the mobile infrastructure market.