Marconi boss in £9m windfall
Marconi CEO Mike Parton is £8.8m richer after Ericsson bought his company for £1.2bn.
Ericsson is buying the bulk of Marconi, the former GEC, once the country’s biggest private employer. The remainder of the business — the British services operation — will be spun off into a new company, telent, which will be listed on the London Stock Exchange.
The former powerhouse, once led by the legendary Lord Weinstock, was left with little chance of survival after it failed to win a portion of a £10bn contract to upgrade BT’s network back in April; that disappointment halved Marconi’s stock market value and forced the group to look for a buyer.
Marconi had only just recovered from a disastrous over-investment in telecoms assets during the technology boom of the late 1990s. By August 2002, the debt-laden Marconi was forced to hand control of the company to its banks and bondholders. Many believe potential merger partners were frightened by the size of Marconi’s pensions obligations. The accounts show a £109m shortfall in its pension fund but some analysts believe the true gap to be much greater.
While admitting that Ericsson is paying a full price for Marconi, analysts admit that it’s a reasonable deal for both sides. “We perceive the acquisition as being slightly positive for Ericsson, as long as integration is as smooth as management expect,” said Stuart Jeffery, at Lehman.
Ericsson expects its new assets, which lost £9 million last year, to be earnings neutral next year, but to add to profits in 2007.
Meanwhile, telent is an “unglamorous” business, but one that “will tick over for as far ahead as you can see”, said Julian Hewett of technology consultancy Ovum. Telent posted a profit of £37m last year.
Marconi shares rose 18.25p to 369.25p.