Marconi Corporation, the troubled UK telecommunications equipment maker, refused to confirm that it was discussing its possible sale to Swedish group Ericsson, describing such reports as “rumours”.
Marconi shares shot to a five-month high on Monday following reports in several papers, including the Financial Times, that Ericsson was in talks with Marconi’s advisers over a potential deal.
“We do not comment on rumours and this is just another rumour,” said a Marconi spokesman, adding that Marconi had no plans to issue a statement on Monday.
Marconi has been talking with a wide number of companies over a possible sale or a strategic partnership since August. Huawei, the Chinese company with which Marconi has distribution agreements, had been regarded as a likely buyer. However, there have been concerns over possible national security issues surrounding Marconi’s defence contracts, while the UK company’s pension fund deficit is also seen as a barrier.
Marconi’s shares, which closed at 308¼p last Friday valuing the group at about £700m, have been supported over the past week on hopes that the Swedish telecommunications maker would make a move. Ericsson won the £10bn contract for BT’s new telecoms network in April, seeing off Marconi.
Marconi’s UK business would be a sensible acquisition for Ericsson, which is seeking a long-term relationship with BT, although it is unclear how Marconi’s other international businesses would fit into Ericsson’s operations.
Marconi, which made extensive investments into dotcom equipment makers, has been struggling since the burst of the high-tech bubble. After a financial restructuring in 2003 it was re-listed as Marconi Corporation, seeing its shares more than double to more than 700p within a year. However, its shares plunged when it announced that it had lost the BT contract as it could not compete against Ericsson on price.
In May, the company responded by announcing it was cutting 800 UK jobs and further restructuring its business, but in August it unveiled widening first-quarter losses and a decline in gross margin. Some analysts believe it is unlikely Marconi can continue as an independent telecoms equipment supplier as it lacks the global scale to be competitive.
Marconi is advised by Morgan Stanley and Lazards. JPMorgan Cazenove are its brokers.
By midday on Monday, Marconi shares were trading 9.3 per cent higher at 337p, while Ericsson stock was up 0.4 per cent SKr28.10.