GEC adds Reltec to telecoms portfolio

UK industrial giant, GEC, has bought Reltec Corporation, a US telecoms equipment manufacturer. The deal is worth $2.1bn, and sees GEC dip into a cash war chest estimated to contain about £2.7bn.

The move is also the first major deal struck by GEC since it recently sold its Marconi defence electronics business to British Aerospace for £7.7bn, and promised to pay more attention to telecoms, where its Marconi Communications subsidiary already operates.

Lord Simpson, chief executive of GEC, said: "This acquisition provides access to the important North American market and to Reltec's blue-chip customers. It also reinforces our position in the high growth transmission and access segment of the communications equipment market."

GEC has its eyes on combining high-speed SDH (synchronous digital hierarchy) technology from Marconi Communications with the local loop expertise of Reltec, to provide bundled offerings.

Reltec's customers include AT&T, MCI WorldCom, Sprint and most of the regional Bell operating companies.

US venture capital outfit, Kohlberg Kravis Roberts (KKR) owned 80 per cent of Reltec. Henry Kravis and George Roberts of KKR said the deal will create "a formidable, global enterprise". It also raises the UK's position in the telecoms equipment supplier league, pitting GEC against such national champions as Lucent (US), Nortel (Canada), Alcatel (France) and Ericsson (Sweden).

GEC is known to have considered making an offer over a year ago, but a share price of over $40 proved a turn off. GEC's offer yesterday works out at $29.50 per share, a premium of 36 per cent on Reltec's closing price on Friday 26 February.

Cleveland, Ohio-based Reltec has about 6,600 employees, 4,700 of whom are based in the US.