Lagardere and Daewoo to Buy Thomson --- Sale by French Government Of the Troubled Firm Creates Defense Giant
PARIS -- In a move that creates a new French defense giant and transforms South Korea's Daewoo Group into a global consumer-electronics leader, the French government decided to sell Thomson SA to France's Lagardere Groupe and its ally, Daewoo.</br></br>The deal marks a milestone for Europe's defense business, which is struggling to consolidate, and came as a surprise to those who had bet that Thomson would go to rival bidder Alcatel-Alsthom SA. The merger of Lagardere's Matra defense division with Thomson's defense arm, Thomson-CSF, will more than double its size in the defense sector and create the second-biggest weapon-systems group in the world, behind Lockheed Martin Corp. of the U.S.</br></br>It also has important ramifications in the U.S., where Thomson's consumer-electronics arm, Thomson Multimedia, is the largest single seller of TV sets, with a 20.5% market share, through the RCA and GE brands it controls. As part of the transaction, Daewoo Electronics will buy Thomson Multimedia from Lagardere for an undisclosed price. Thomson Multimedia has bled red ink, and its sale could jeopardize some of its 6,000 jobs in the U.S., although Daewoo said it has no immediate plans to reorganize the operations.</br></br>Daewoo said it will rely on existing management in Paris and outside Indianapolis, where the U.S. operations are based. However, Daewoo Electronics Chairman Bae Soon Hoon said he believes Daewoo's cost-cutting know-how will reverse recent losses at Thomson Multimedia. North America represents 64% of Thomson Multimedia's sales.</br></br>Though the sale of Thomson had set off a furious behind-the-scenes lobbying effort by both Lagardere and Alcatel, the company is by no means a prize. In fact, the government is selling Thomson for a symbolic sum of one French franc and will inject 11 billion francs ($2.1 billion) into the group before its sale to partially wipe out debts of 25 billion francs. Indeed, Thomson is in such dismal shape that shares of Alcatel, France's telecommunications giant, rose 2.4% in Paris stock-market trading on the news that its bid failed. Trading in Lagardere and Thomson-CSF was suspended yesterday.