European Business News (EBN), 96-12-04

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated December 4 1030 CET

CONTENTS

[01] France cancels Thomson privatisation after commission rejects sale of assets to Daewoo

[02] German orders show surprising strength in quarter

[03] Boeing hires McDonnell Douglas for assembly work

[04] NTT says break-up plan will go to parliament in new year

[05] Olympic Airways shows first profit in 19 years

[06] Carlton posts 20% gain in pretax profit

[07] Williams Holdings to sell building materials division for $590 million cash

[08] Delta discusses acquisition of Continental Airlines

[09] Paris goes on security alert after express-train bombing

[10] Bass to create 7,000 jobs in current fiscal year

[01] France cancels Thomson privatisation after commission rejects sale of assets to Daewoo

The independent panel said it objected to the terms of the sale of Thomson's consumer electronics business to Daewoo Electronics.

The French government's decision to sell Thomson to Lagardere and Daewoo Group for a symbolic sum of one franc provoked bitter debate in France. Thomson unions and opposition leaders harshly criticised the government for selling the consumer electronics unit to a foreign company.

Daewoo Electronics had promised to create 5,000 jobs in France over the next five years, practically doubling the number of employees in the country.

The finance ministry said it will proceed with Thomson's privatisation, Lagardere said it will continue to pursue its takeover of Thomson. 'The government will come up with conditions quickly so that the privatisation process can continue,' the finance said. 'The privatisation is indispensable to the continued development of the company, to the creation of a competitive defence electronics sector, and to job creation as well as the development of defence technologies,' it added.

Lagardere noted that its takeover plan, `in the context of the restructuring of the defence industry' had been well-received by the government, the international defence community and by industrial and financial circles.

Lagardere said it will take into account the privatisation commission's opinion in its new offer. For his part, Daewoo Electronics chairman Soon- Hoon Bae said he was 'shocked and scandalised' by the decison to suspend the Thomson privatisation, BFM radio reported.

The government had picked Lagardere over rival bidder Alcatel Alsthom. An Alcatel spokesman said the company is waiting for more details on the conditions of the new privatisation process before commenting on the suspension.

[02] German orders show surprising strength in quarter

The month-on-month data reflect greater-than-expected gains, which the ministry called 'very strong.' Economists surveyed by AP-Dow Jones had been expecting an increase of 1.7% in October from September. Their forecasts ranged from a 1.0% to a 2.5% increase.

Meanwhile, the government and the Bundesbank released conflicting data on the rate of growth of the nation's economy.

The gains in orders came after disappointing data on industrial production released Tuesday, as well as worse-than-expected orders data for September.

On an annual basis, orders gained 9.2% from October 1995.

The October gains 'for the most part made up for the drop in orders in the previous month, although the preliminary September results weren't notably corrected upward, contrary to expectations,' the finance ministry said.

The data for September were revised only slightly upward. According to revised figures, September orders fell 3.4% from August, rather than the 3.6% drop originally reported. September orders dropped 1.4% from September 1995, rather than the 1.6% decline originally reported.

The ministry also noted that October order inflows in western Germany were 'positive overall,' while they declined in the eastern part of the country. Around 90% of German industry is in the western region.

Meanwhile, the government said growth in gross domestic product slowed to 1% in the third quarter following an unrevised 1.5% growth in the second quarter.

Though the expansion was slower than in the second quarter, it came in at the high end of economists' expectations. But data from the Bundesbank show that GDP grew 0.8% in the quarter from the preceding three months and 1.9% from the year-earlier third quarter.

Those figures, which are somewhat weaker than the government's figures but more closely watched by the markets, show that growth in the nation's stockpiles continued to decelerate for the third consecutive quarter. Slowing inventory growth could presage a pickup in industrial demand and activity.

Analysts said they expected the economic recovery to tail off in the fourth quarter and into 1997, still leaving scope for a possible easing of short- term interest rates by the Bundesbank.

Economics Minister Guenter Rexrodt said the data shows that the German economy is gaining strength. 'Forces contributing to the buoyancy of the economy are gaining further strength,' he said, adding, `The data show 'we can head into the new year with confidence.

[03] Boeing hires McDonnell Douglas for assembly work

Officials of both the big U.S. aerospace companies said that, as expected, they signed an agreement earlier this week to 'collaborate' on production of new variations of Boeing's biggest 747, 767 and 777 commercial airliners. Under the accord, several hundred engineers and design workers from the Douglas Aircraft airliner division will be lent to Boeing divisions in Seattle to begin helping with design tasks for new larger and longer-range derivatives of the 747 jumbo jet. Boeing could decide to produce that plane in the next two to six months.

Market leader Boeing currently has more aircraft development and production work than it can handle, while McDonnell's struggling California commercial- jet unit has an excess of labour and capacity.

A more detailed agreement, spelling out other design functions and possible jet-assembly work for Douglas Aircraft, is expected to be complete by mid- January.

Lawrence Clarkson, the Boeing senior vice president who negotiated the pact, said Boeing needs the new alliance and McDonnell's options were limited in the market for bigger 'wide-body' planes. He said Douglas Aircraft faced a future in which it would either 'fade from the scene' or align with Airbus, 'which would have complicated life for everybody.'

Michael Sears, president of Douglas Aircraft, called the agreement 'a good business decision by both parties' that helps his company maintain its skills while preserving its independence in important ways. Mr. Sears said his company will pursue all reasonable business prospects in its new role as a for-hire design-and-assembly house. But he added that under the agreements now forming between the two companies, Douglas Aircraft won't perform work on any planes that compete with the Boeing models being designed or assembled by his company's employees.

A U.S. spokesman for Airbus, the second-largest plane maker, based in Toulouse, France, said the Boeing-McDonnell agreement 'would just appear to be a way for Boeing to obtain some highly skilled talent very quickly.'

McDonnell Douglas has continued to wither as a threat in the market for jetliners. Last month, McDonnell officials cancelled plans for a new 300- seat plane and said the company was no longer in contention to be a major player in the commercial-aircraft business.

In New York Stock Exchange composite trading yesterday, Boeing fell $1.125 to close at $96.375. McDonnell closed at $52.50, down 12.5 cents.

[04] NTT says break-up plan will go to parliament in new year

That would require an agreement between the Ministry of Posts & Telecommunications and NTT by mid-December, he said.

Junichiro Miyazu said at a press conference that the company doesn't want to wait three years to enter the international telecommunications market. Under current Japanese law, the company is limited to providing domestic telecommunications services. A deal allowing NTT to enter the overseas market is an additional focus of the break-up talks.

Miyazu said that splitting up the company into a long-distance carrier and two regional telephone companies, unified under a holding company, was one possibility currently under discussion.

But he refused to say whether negotiations between the company and the Posts Ministry were focusing on one particular break-up plan.

'The holding company plan is one of several ideas being considered,' he said.

An article in Monday morning's Nihon Keizai Shimbun stated that the Ministry and NTT had reached a general agreement on a break-up plan which is contingent on the repeal of the ban on holding companies, in effect allowing NTT to maintain some form of unified control over its various operations.

Spokesmen for NTT and the Ministry denied Monday that the two sides had reached an agreement.

During Wednesday's press conference, Miyazu also stressed that discussions on the break-up are continuing. He said no date for conclusion of the talks has been set.

[05] Olympic Airways shows first profit in 19 years

'After 19 years of registering losses, the 1995 fiscal year was a profit- making one for Olympic Airways with the company showing a high cash balance and a real profit. . .' the carrier said.

Fiscal 1995 operating profits stood at 13.3 billion drachmas in 1995 and cash liquidity increased to 49.7 billion drachmas at the end of 1995 compared to 21.5 billion drachmas in 1994, Olympic said.

'The company's aims continue to focus on full implementation of the restructuring plan approved by the EU Commission on October 7, 1994 and the Greek government on December 14, 1994,' Olympic said.

[06] Carlton posts 20% gain in pretax profit

The company said it was continuing to gain from its worldwide expansion of screen-based entertainment.

`Its largely organic' growth, said Jason Crisp, an analyst with Society Generale Strauss Turnbull Securities. `It's a very good increase in profit on less-than-exciting growth in turnover,' he said, noting the slow growth in television advertising and the videocassettes markets.

In fact, Carlton's largest division - broadcasting - showed the slowest growth, with operating profit up 5% to £129.4 million on turnover that grew just 2.5% to £686 million. Carlton operates the London weekday and Midlands region ITV franchises and last week bought the southwest England franchise for £85 million. The purchase is expected to marginally aid earnings in 1996.

The company said it planned a drive into pay television to build on its broadcasting strengths. 'We want to build up our interests in pay television, both as a content provider and operator. These may encompass cable, satellite and digital television,' chairman Michael Green said.

'Free television and pay channels should not be seen as competitors; they are complementary businesses...Carlton wants to establish a significant presence in both markets,' he added.

Among Carlton's three other divisions - the U.S.-based Technicolor film processing and video duplications units, and the Quantel equipment business - growth proved stronger.

Technicolor Film notched up a 27% rise in operating profit to £52.7 million on an 18% sales rise to £296 million. Carlton credited the gain to Hollywood studios increasingly using a ''big bang'' pattern of release to many cinema screens at once. It also noted that the number of cinema screens in the U.S. and Europe is growing.

[07] Williams Holdings to sell building materials division for $590 million cash

Williams will keep a 26% stake in the new company to be called Newmond . Williams director Mike Davies will become the chief executive of Newmond.

Williams Chairman Sir Nigel Rudd said the sale demonstrates the company's strategy of focusing on business with global growth potential. Proceeds from the sale, he said, would be used to `strengthen and develop our international positions in fire protection, security products and home improvement products.'

Williams expects to make an exceptional gain of some £246 million on the sale. It will invest £57 million in Newmond.

The company also said that second half trading across the group was in line with an outlook issued at the interim results in September. Williams' other divisions manufacture fire protection and security products.

[08] Delta discusses acquisition of Continental Airlines

Preliminary talks between the No. 3 and the No. 5 carriers have been held since late summer, people close to the situation told The Wall Street Journal. Though an acquisition is the most likely outcome, the two companies also are exploring lesser options. 'They're talking about the synergies of the two carriers,' said one person familiar with the talks.

By acquiring Continental, Delta would surpass UAL United Airlines as the No. 1 U.S. carrier, with nearly a quarter of the domestic market, though it would still trail United and AMR American Airlines in international service. Terms of a possible acquisition weren't available, although Continental has a current market value of $1.83 billion, based on yesterday's closing price of $28.375 for the more widely traded B shares on the New York Stock Exchange.

A Delta-Continental combination could prompt other acquisitions in the U.S. airline industry, something predicted even before USAir Group put itself up for sale a year ago and had unsuccessful talks with United and American airlines.

Prospects for growth at major U.S. carriers, which are flush with cash after record results in 1995 and 1996, are meagre in the current environment, and rather than trying to wage expensive battles for market- share, analysts have speculated that airlines may find it more attractive to grow by acquiring the markets of competing carriers.

What's more, Continental has been thought to be a prime takeover target since it is controlled by an investment group headed by financier David Bonderman, who describes himself as a 'medium-term investor.' With huge gains at hand since buying Continental out of bankruptcy court and forging a dramatic turnaround, Mr. Bonderman may be interested in an exit.

It's unclear why recent stock sales by Continental officers were made if merger talks were under way, however. Last month, 10 Continental officers, including Chairman and Chief Executive Gordon Bethune, made substantial sales of their stock holdings. What's more, Mr. Bonderman's investment group, Air Partners, sold warrants back to the company as well last month.

By acquiring Continental, Delta could expand its strong East Coast presence, and replace its ailing Dallas hub with Continental's strong Houston hub. Continental offers a leading market-share in the New York metropolitan area, and its Newark hub has become the most profitable piece of its operation. Continental could give Delta a very strong southern U.S. dominance, and a more solid grip on Florida.

Because the two carriers have few overlapping routes, they aren't expecting any antitrust problems if they decide to merge, one official familiar with the discussions said.

[09] Paris goes on security alert after express-train bombing

Seventy-nine people were hurt, seven of them critically, or suffered shock after the bomb hit the Port Royal underground station in the early evening rush hour on Tuesday.

No one claimed responsibility, but the target, the timing and the type of bomb echoed attacks last year by Moslem fundamentalists fighting against Algeria's French-backed military rulers.

President Jacques Chirac called the attack 'a barbaric and terrorist act' and vowed that France would do everything in its power to fight terrorism.

Police chiefs meeting late on Tuesday drafted in 400 riot police and gendarmes and troops to put a security plan codenamed Vigipirate back into force immediately.

The plan, applied across France during last year's wave of attacks from July to October, involves intensive patrols by police, paramilitary gendarmes and soldiers at public transport stations, at public buildings and in the streets.

Border controls, virtually eliminated under a European Union open border agreement, were reinstituted on Tuesday night.

'From (Wednesday) morning, the Defence Ministry will reinforce surveillance at Paris stations, transport networks and airports. A first contingent of 500 men will back the action of police and gendarmerie offices,' an aide to Interior Minister Jean-Louis Debre told reporters.

The aide said troops and police would also boost security in cities across the country.

The explosion occurred in the fourth carriage of the RER train at 6.05 p.m. (1705 GMT) as it drew into the station on the Left Bank.

[10] Bass to create 7,000 jobs in current fiscal year

The company also said pretax profit rose 12% in fiscal 1996 to £671 million ($1.10 billion).

Sir Ian Prosser, chairman of the British brewer-to-leisure group, said the company expected consumer spending in the U.K. to remain buoyant over the nexxt year and that the company's pubs and restaurants would take advantage of the economic growth.

The company plans a £300 million investment programme next year on its Bass Taverns. This year the company invested £568 million in capital projects, which it calculates created at least 6,000 jobs.

The company's Holiday Inns increased trading profit by 18.9% to £195 million, while its Bass Taverns' managed pubs grew operating profit by 22.8% to £221 million. Profits at the brewing operations grew 9% to £157 million.

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