PARIS, Oct. 16 -- The government announced Wednesday it plans to sell electronics giant Thomson SA to the Lagardere Groupe to create a major defense conglomerate capable of rivaling the large U.S. arms manufacturers. The government chose Lagardere over Alcatel Alsthom SA, the only other candidate, to take over the state-owned firm. However, it said both bids will be submitted to the independent Privatization Commission. A statement from Prime Minister Alain Juppe's office said the government would take 11 billion francs ($2.11 billion) from privatization receipts to recapitalize Thomson SA, which lost 1.38 billion francs ($26 million) in 1995 and has debts of around 25 billion francs ($4.8 billion). It said that under the proposed deal, which must still be approved by the European Commission, South Korea's Daewoo Electronics would take over Thomson Multimedia, Thomson SA's consumer electronics arm. Daewoo has a 'very sound understanding of the costs of mass production,' and 'will gain from Thomson Multimedia the necessary competitiveness for its future development,' the statement said. Industry Minister Franck Borotra said Daewoo plans to create 5,000 new jobs at Thomson Multimedia in France. The government said Lagardere's takeover would allow the merger of the group's missile-producing Matra Defense Espace division with Thomson-CSF, Thomson SA's profitable defense electronics wing, to create 'one of the leading groups in the world capable of supplying turnkey weapons systems.' The link-up would 'endow the new conglomerate with an unrivalled export strike force,' the statement said. Thomson could provide Matra with missile guidance, radar and other defense systems.
It said Lagardere also intends to sell Thomson-CSF's 17.4 percent stake in SGS-Thomson Microelectronics. The profitable Lagardere Groupe, led by its founder Jean-Luc Lagardere, also owns the publishing firm Hachette and is a major shareholder in the state-owned automaker Renault SA. Thomson SA is currently owned 76 percent by the government and 20 percent by the state telecommunications monopoly France Telecom. Thomson SA holds 58 percent of Thomson-CSF and 100 percent of Thomson Multimedia. The government said the state would retain a 'golden' stake in Thomson SA for reasons of national security after the group's privatization, which is expected before the end of the year. Shares in Thomson SA and Lagardere were suspended on the Paris bourse Wednesday. But Alcatel Alsthom shares were up more than 3 percent by late morning. Alcatel Alsthom, one of France's largest industrial groups whose interests include telecommunications, energy and transport, had been tipped by the French press to win the bidding for Thomson, despite incurring massive losses last year.
