GEC to buy telecommunications firm

General Electric Company of the U.K. cleared up some of the speculation over its acquisition intentions with the announcement this month that it plans to acquire telecommunications company Reltec of Cleveland for $2.1 billion. The two companies signed a definitive merger agreement March 1 that will be accomplished by a cash tender offer for all of Reltec’s shares at $29.50 per share. In addition, Reltec’s controlling shareholders, affiliates of Kohlberg Kravis Roberts of New York City, have entered into a stockholder agreement in which they will tender their 81.5% stake of Reltec to GEC.

Reltec has revenues of more than $1 billion and designs, manufactures, and sells telecommunications network products. The company’s Cleveland headquarters are in the same city as that of GEC subsidiary Picker International. The deal would be a big move forward in GEC’s effort to reshape itself into a major player in the telecommunications and technology industries.

GEC’s future has been a source of speculation since January, when the company said it would sell its Marconi Electronics Systems subsidiary to British Aerospace for about $13 billion. The deal gave GEC roughly $4.5 billion in cash that it said it would use to strengthen its communications and technology interests.

GEC chairman George Simpson at one point speculated that his company could be interested in buying the medical electronics businesses of Siemens or Philips, an intention that was dismissed by representatives from both firms (SCAN 2/3/99). If the Reltec deal goes through, it would make the likelihood of such an acquisition more remote. GEC would still have enough cash to buy a small or mid-sized company, however, and the U.K. firm has been linked with several medical imaging vendors besides Siemens and Philips (SCAN 2/17/99).