Marconi boosted by takeover talk

Marconi shares jumped to a five month high today amid speculation linking the UK company to a takeover approach from Swedish telecoms giant Ericsson.

The stock rose 10% as investors in the struggling telecoms equipment company eyed weekend reports of a offer worth more than £700m (€1.01bn) from Ericsson.

That would put the Swedish firm ahead of Chinese rival Huawei, which is thought to have been involved in takeover talks with Marconi following the establishment of a business partnership earlier in the year.

Marconi – formed out of industrial conglomerate GEC – confirmed in August that it was in the early stages of discussions about “potential business combinations”, but did not provide further details and said there was no certainty that a takeover would follow.

The company has been forced to look at its options after failing to win a contract with BT to work on the group’s £10bn (€14.7bn) network upgrade.

That disappointment highlighted the view among analysts that Marconi is too small to compete with heavyweights such as Ericsson and Siemens.

Ericsson is thought to see substantial cost savings from a combined operation, with the Mail on Sunday reporting yesterday that the firm planned to retain around 80% of Marconi and spin off the remainder.

Whoever takes over Marconi will have to deal with the £228m (€331m) deficit in the group’s pension fund.

Its pension fund trustees can require the hole to be filled if they think the risks facing the company have increased as a result of the takeover.

Marconi, which employs around 4,300 people in the UK, hit problems when a major acquisition spree in the 1990s led it into financial difficulties.

It survived with a debt and business overhaul, but former debtholders who took on shares in the restructured company have seen the stock fall from 546p in April to 308.25p on Friday. Shares were up 28.75p to 338p today.