The Monopolies & Mergers Commission has allowed the proposed acquisition of the Plessey Co Plc by GEC Siemens Plc to proceed. The decision, accepted by the Trade & Industry Secretary Lord Young, is dependent on GEC Siemens giving undertakings that the acquisition would not act against the public interest. The Commission’s report said the merger would not give rise to adverse effects in telecommunications or semiconductors, though it did raise concerns over competition in defence, seemingly Plessey’s last hope. There is a bow in the direction of concerns about West Germany’s less than solid stance on defence issues, and it appears that Siemens’ involvement on the defence side will be very hedged around with conditions: arrangements for ownership and management of Plessey’s semiconductor, defence and research and development operations will have to be individually cleared on grounds of national security. But GEC will not be allowed any interest over the management of Plessey’s radar and military communications businesses and traffic control activities, implying that the first two will either have to pass to Siemens, which seems strange on national security grounds, or be sold. There are a few more steps before any new takeover bid can be consummated: the Commission’s report will now be passed on to the Secretary of State for Defence, who will examine security implications, as well as the Office of Fair Trading, before final acceptance of the recommendation. If GEC Siemens Plc does decide to come back with a new bid, Plessey will have to rely on its shareholders to preserve its independence and that it is worth more on its own than GEC Siemens is prepared to offer: one area that it clearly has a strong case is in telecommunications, where it can argue that with the extraordinary value put on Italtel SpA by the four rival telecommunications firms that wanted to partner it, Plessey’s 50% stake in GEC Plessey Telecommunications is alone worth the valuation put on the whole of Plessey by GEC Siemens Plc, and that Siemens should not be allowed to get a major stake – an initial 40% was proposed – in such a desirable business on the cheap, and should instead have to participate in an auction with the likes of the equally hungry AT&T Co, Alcatel NV, L M Ericsson Telefon AB and Northern Telecom Ltd.
