Thomson shares sparkle on takeover talk

27th March 2006, Comments 0 comments

PARIS, March 27, 2006 (AFP) - Shares in French media technology group Thomson surged by 6.66 percent in trading on Monday on talk that it is a target for a takeover bid.

PARIS, March 27, 2006 (AFP) - Shares in French media technology group Thomson surged by 6.66 percent in trading on Monday on talk that it is a target for a takeover bid.

The group, a leader in digital television and film technology, is periodically the subject of takeover rumours, the latest coming in the form of a report on Sunday in the British newspaper The Business that investment banks were putting together a bid of EUR 5 billion.

The report said that in the last two weeks, investment funds had been invited to join the consortium.

The report said that the approaches followed remarks by the chief executive of Thomson, Frank Dangeard, on February 28 to the effect that the company was open to approaches to strengthen its position as the world leader in the field of video and television set-top box technology.

A French stock brokerage, which declined to be named, commented: "This rumour is rather different from the one about Thomson which ran at the beginning of November on the idea that a leveraged buy-out was being prepared."

A leveraged buy-out means acquisition of a company by senior managers, using debt underwritten by future earnings.

The brokerage added: "In a market driven by speculation in several sectors, and as the option of an alliance with Alcatel recedes clearly following confirmation that Alcatel and Lucent are holding talks, facilitating the work of investment funds, we expect the share to rise at least in the near future."

At mid-day on Monday, Thomson shares were showing a gain of 6.66 percent to EUR 16.34.

At brokers Aurel Leven, an analyst commented: "This scenario seems to us to be altogether probable, notably because Thomson shares are under valued and this makes the group an ideal target."

At Société Génerale bank, analysts also said that a takeover of Thomson looked "more and more credible".

"The share rallied slightly after it published results for 2005. These removed some of the concerns in the market about the ability of the group's strategic activities to generate cash," the bank said.

"In addition, we are increasingly convinced of the possibility of a leveraged buy-out or an industrial takeover, or even a mixture of the two options this year, and this should be good for the share."

Another analyst, who did not want to be named, described the rumour as "credible" but said that a takeover would be "very complicated".

He said: "Thomson has very varied activities and funds would have difficulty in making a takeover profitable."

In November the group had been the object of rumours that it might be bought by a big US investment fund. These rumours had been strengthened by a fall of Thomson shares since the beginning of 2005. Over 12 months, the share has fallen by about 23.30 percent.

Last month Thomson reported a narrowing of its net losses in 2005 and said it would "emerge from the tunnel" and turn a profit this year.

The group said it had made a net loss of EUR 573 in 2005, from a net loss of EUR 636 in 2004.

Thomson is transforming itself from being a manufacturer of consumer electronics into a provider of services to media companies and film studios.

US venture capital firm Silver Lake has already invested US $500 million in Thomson through a private series of convertible bonds and sources say it would be involved, The Business reported.

Copyright AFP

Subject: French news

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