When Harold Wilson talked about Britain being “forged in the white heat of a technologic (the scientific and technological) revolution,” no doubt, he expected one of the main providers of that white heat to be the General Electric Company, or GEC. At the time, it was after all Britain’s number one manufacturer - and having built upon the legacy of Guglielmo Marconi, the inventor of the radio, under the wise leadership of the late Arnold Weinstock, from 1963 to 1996, the company had a massive £2.6bn cash reserve.
But then, it all went horribly wrong. Lord Simpson took hold of the reins, and brimming over with ambition embarked on a spending spree, and what he saw as greater focus. The defence contractor part of the business was sold out to British Aerospace, the company was renamed Marconi, and in the heady days of dotcoms hysteria, the business was valued at £35bn. But in the wake of the dotcom crash, it turned out its investments in US telecoms and internet companies were not the masterpieces of savvy finance that the markets initially thought they were - and the share price imploded, debts started to mount- and the receivers were called in.
The resurgent Marconi has specialised in telecoms equipment. But it was a small player, not big enough to enjoy the economies of scale needed in this business - and with its failure to win a contract to supply BT with equipment for its 21st Century network, the writing was on the wall.
Marconi itself has not actually been sold. It will continue to exist, but under the new name of Talent. But in practice, the lion’s share, representing 75% of turnover, is going. Its purchaser- Swedish company, Ericsson has a heritage which is almost as rich. Tracing its routes back to 1876 when Magnus Ericsson set up an electro-mechanical repair shop, but while Marconi has stuttered and limped into the 21st Century - Ericsson is now the world’s largest maker of wireless networks.
Carl-Henric Svanberg, Chief Executive of Ericsson, said: “The acquisition of the Marconi businesses has a compelling strategic logic and is a robust financial case. As fixed and mobile services converge, our customers will substantially benefit from this powerful combination. Ericsson and Marconi know each other well and have had a successful partnership for over ten years.”
In all, the Swedish company is forking out £1.2bn - but £185mn of that will be injected into the UK Pension Plan and £490mn will be retained in an escrow arrangement for the potential benefit of the UK Pension Plan.
What’s left of Marconi, or Talent, will focus on servicing Marconi’s customers such as BT, Cable & Wireless and Network Rail. Ericsson will be its key customer.
But while, Talent will have responsibility for the pension fund- it will in fact be dwarfed by the pension it administers, and there’s talk the fund could actually be spun off into a separate entity, listed on the stock exchange.
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