Thales, Alcatel shares rise on talk of tie-up

21st March 2005, Comments 0 comments

PARIS, March 21 (AFP) - A report that French defence electronics group Thales may take over the satellite activities of telecommunications equipment maker Alcatel drew favorable reaction from analysts Monday.

PARIS, March 21 (AFP) - A report that French defence electronics group Thales may take over the satellite activities of telecommunications equipment maker Alcatel drew favorable reaction from analysts Monday.

The newspaper Les Echos reported that the two companies were discussing a tie-up that would enable the state to reduce its holding in Thales.

The paper, which did not provide sources for its story, said that the talks concerned Alcatel contributing its assets in the field of satellites to Thales in return for an extra share of the capital.

Thales shares were showing a gain of 2.4 percent to EUR 32.91 while Alcatel stock was off 0.21 percent to EUR 9.65. The overall CAC 40 index was showing a slight drop of 0.04 percent to 4,049.11 points.

"It seems like a good idea for Thales, but the deal is still in early stages," said CM-CIC. There also remains the question of the state's participation, it added.

The European Aeronautic Defence and Space Company (EADS) recently turned down a possible tie-up with Thales leaving the way clear for other alternatives.

"Apparently, Alcatel is taking advantage of this opportunity to advance its proposal," said the brokerage house Aurel Leven.

Alcatel wants to enhance its relationship with Thales, in which it holds a 9.1-percent stake, to boost its operations in defense, chief executive Serge Tchuruk told the newspaper Le Figaro on February 3.

"Divesting its satellite activities would allow Alcatel to improve its operating margins," said Aurel Leven.

Laurent Balcon, an analyst at Global Equities, said the deal would trigger "an automatic increase in the margins of Alcatel's private communications division, or space activities, that would raise operating margins from 5.0 to 6.0 percent."

Balcon also said that capital was better involved in more than just purely telecom activities, which weighs on profitability.

© AFP

Subject: French News

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