According to reports, the French government has sent Brussels a detailed restructuring plan for the hardware vendor, which involves the substantial aid package that would begin in January next year.
Basically, the French government wants to inject E520 million ($645m) into the vendor, which will allow it to repay the controversial E450 million ($558.4m) loan it received from the French state back in 2002.
At that time, the Commission had only approved the loan so long as the full sum was paid back by no later than June 2003. This never happened, and the French government has ignored repeated requests from Brussels to recover the money.
In November, under increasing pressure from Brussels, the French government decided it would forgive 90% of its controversial E450 million ($558.4m) emergency loan to Bull.
The generous terms of the rescue deal further stretched the already strained relationship between the EC and the French government, and days later the Commission announced it had begun the process of suing the French government for failure to recover the loan.
Unfortunately, the French Government is notorious in stretching (or even breaching) European competition rules governing state subsidies for struggling companies. The Commission is currently investigating other recent cases of the French government bailing out French businesses. These include state aid to France Telecom, Air France, and most recently the French government’s E3.2 billion ($3.96bn) bailout of ailing engineering group Alstom.
The new restructuring plan filed by the French government does however contain a new twist, because it is only due to start in January 2005. This is exactly 10 years after the last government bailout, when Bull benefited from E1.3 billion ($1.61bn) worth of state aid back in 1994. Prior to this, between 1983 and 1993, it is estimated that the French government has pumped another $2.50bn of handouts into the vendor.
Under European Union state aid rules, governments can in principle only grant subsidies to businesses that have not received state aid over the last 10 years. This rule means that the French Government now has a chance of getting this latest bail-out approved by the Commission.
Under the plan, state-owned France Telecom and the Japanese computer company NEC, both owners of 16.9% of Bull’s shares, will each contribute E7.5 million ($9.3m); Debeka, a German insurer that is a Bull client, will contribute E3 million ($3.7m); the French insurer AXA will invest E9 million ($11.1m); and a group of 350 employees will raise at least E6 million ($7.4m) towards the recapitalization of Bull.
According to a European Commission spokesman, an investigation will probably begin this spring into the French government’s plans to cancel the debt.
Bull makes specialized computer equipment. Its main products are computer servers for public administrations and large companies, and its competitors include IBM, Hewlett-Packard, and Dell.
This article is based on material originally published by ComputerWire
