European Business News (EBN), 97-01-07

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated January 7 1845 CET

CONTENTS

[01] Thomson-CSF faces auction

[02] The DIW thinktank forecasts a downbeat view of the German economy this year

[03] France to submit Aerospatiale and Dassault merger plans

[04] Gulf Canada blasts Clyde defence

[05] Bank of England Deputy calls for rate rise

[06] Prodi may set second budget

[07] Royal Ahold sales rise 20%

[08] Canon ditches $400m stake in Next Software

[09] Renault predicts stable market share in `97

[01] Thomson-CSF faces auction

France wants to sell defence and electronics group Thomson-CSF privately to the highest bidder among a group of industrial candidates, reported the financial daily Les Echos. The procedure would be open to 'qualified bidders' and would use price as a determining factor over other considerations, said Les Echos, citing unnamed sources.

The government is expected to announce its plans for the Thomson-CSF sale in the coming days. Using Thomson-CSF's current share price, the government has set a minimum price of 21 billion francs ($3.98 billion) for the company, the defence electronics arm of Thomson SA, according to Les Echos. But the current plan rules out a public share offering, which is favoured by Thomson's management and Industry Minister Franck Borotra.

The government now hopes to privatise Thomson-CSF in 1997, with Thomson Multimedia, the consumer electronics unit, being sold sometime afterward.

As reported, France's privatisation commission blocked the sale of Thomson SA, the holding company for Thomson-CSF and Thomson Multimedia, to Lagardere when the commission objected to the planned sale of the Thomson Multimedia unit to Daewoo Group's Daewoo Electronics unit.

In a move that sparked bitterness in South Korea, the commission found fault with Daewoo after unions and some politicians protested against South Korean ownership. Indeed, a special envoy of President Jacques Chirac will visit Seoul next week to try to mend ties strained by the French rejection of the South Korean bid. Jean-Claude Paye, a member of France's State Council, will meet with President Kim Young-sam and Cabinet ministers during his three-day visit starting January 13, said Foreign Ministry official.

[02] The DIW thinktank forecasts a downbeat view of the German economy this year

This is lower than the 2.5% growth in 1997 predicted by the six institutes in their joint autumn forecast.

The left-leaning DIW economic institute said it expects German economic growth won't be strong enough this year to help the weak jobs market, nor will it make up for the continued economic demands resulting from German unification.

DIW predicts growth in 1996 will total only 1.5%. The Federal Statistics Office will release preliminary 1996 GDP data Thursday.

DIW predicted joblessness in both western and eastern Germany will continue to rise into 1998. Before falling again, total unemployment will reach a peak of 4.5 million persons.

A spokesman for the institute said DIW expects a ''large number of participants'' to be included in the startup of Europe's currency union, which DIW believes will begin on time on Jan. 1, 1999.

Nevertheless, it warned that most countries, including Germany and France won't exactly meet the criteria outlined in the Maastricht Treaty on economic and monetary union (EMU) for joining the single currency. Nor does DIW believe those countries will meet the criteria on time. Data from 1997 will be used to determine the participants, who will be selected at the beginning of 1998.

[03] France to submit Aerospatiale and Dassault merger plans

The privatization commission will be asked to decide on the correct values for the two companies and to give an opinion on how the deal should be structured, the finance ministry said in a press release.

Aerospatiale and Dassault agreed to broad outlines of the merger in December, but financial details of the linkup have yet to be made public.

The merger is part of the government's plan to streamline France's bloated defense sector in the post-Cold War era. In February, Chirac said he wanted to merge the two aviation companies as part of a broad consolidation of the defense industry.

The government originally gave the two companies until Jan. 1 to formalize the merger plans.

[04] Gulf Canada blasts Clyde defence

'The logic they used is . . . inappropriate and the methodology is unprecedented,' said Dick Auchinleck, Gulf Canada's senior vice president of international marketing.

Yesterday, Clyde Chairman Malcolm Gourlay urged shareholders 'to reject this wholly inadequate bid' of 105-pence-per-share over the weekend, arguing that Gulf Canada was seeking to obtain the benefits of Clyde's valuable cash flow for itself but at the expense of its shareholders. Clyde said management efforts over the last three years have created a balanced portfolio for the company, including quality producing assets, potential developments and prospects in the U.K., the Netherlands, Indonesia and Australia.

The company said its commercial reserves at December 31 were a record 130 million barrels of oil equivalent, an increase of 21% from 1993. It also said financial strength was improving, with a £56.1 million cash inflow for the first half of 1996.

But Mr. Auchinleck criticized Clyde for ignoring its net asset value and concentrating instead on its cash flow multiple to defend itself against Gulf Canada's hostile bid, launched December 18. 'NAV is used unfailingly by every single analyst certainly in this country and it is also the measure North American companies will use to value other companies,' he said. 'The cash flow multiple itself is a very short-term valuation measure.'

[05] Bank of England Deputy calls for rate rise

'It is no secret that the Bank of England believes that interest rates will need to rise in the near future if we are to remain on course to meet the government's inflation target,' said ex-CBI chief Davies said in the prepared text of a speech to be delivered to a farming conference in Oxford.

His comments are likely to fuel specualtion of a further rate rise next week. Chancellor of the Exchequer Kenneth Clarke hopes to keep rates as they are, but he is expected to bow to pressure from Bank of England Governor Eddie George for a 0.25-point rise in base lending rates to 6.25% from 6.00% when the pair hold their next monthly monetary policy meeting on Jan. 15.

[06] Prodi may set second budget

Of particular importance is the creation of a deficit-to-gross-domestic- product ratio that will allow Italy to qualify for the single European currency under the terms of the Maastricht Treaty. 'Our objective remains to enter into the single currency at the start of European Economic and Monetary Union and to put our public accounts in order,' said Prodi.

Prodi made his comments to journalists late Monday and is referring to a Treasury report issued late last week stating that the budget deficit for 1996 will be in the order of 138.5 trillion lire or 15.5 trillion lire higher than the government's original budget deficit target of 123 trillion lire.

The Italian premier's statement came before today's release of gross domestic product data for the third quarter of 1996, which showed a rise of 0.6% from the second quarter. The national statistics agency Istat also reported GDP was up a real, or inflation-adjusted 0.7% from the year- earlier period. While the government's official target for 1997 is growth of 2%, Italian Treasury and Budget Minister Carlo Azeglio Ciampi has conceded that growth will more likely reach 1.5%. Some economists are expecting slightly less than that next year.

If an eventual mini-budget is needed to restore an EMU-acceptable deficit- to-GDP ratio, Prodi said the government will focus on 'spending cuts and not on new taxes.' He added that, 'social spending should be defended because it protects the weakest members of society but it should be modernised.'

Treasury and Budget Minister Carlo Azeglio Ciampi said over the weekend that, 'the increase of the budget deficit in 1996 with respect to the government's predictions is due primarily to the cities early drawing on their accounts with the Treasury.'

The government recently passed a budget of 62.5 trillion lire in an attempt to bring the deficit to gross domestic product ratio in line with the 3% criteria required by the Maastricht Treaty.

[07] Royal Ahold sales rise 20%

Ahold attributed the rise to its July acquisition of U.S. supermarket chain Stop & Shop Companies, noting that without Stop & Shop its sales would have been up by only 10.2%. The stronger dollar was also a boost, with Ahold recording a dollar rate of 1.69 guilders, compared to 1.61 in 1995. At an unchanged dollar exchange rate, Ahold's 1996 sales would have increased by 20.0%. Ahold gains about half its total sales from its ownership of seven large supermarket chains in the U.S.

In the Netherlands, sales rose 4.4% to 15.0 billion guilders with sales at the Albert Heijn supermarket chain up 5% and up 4.0% at its wholesaler Schuitema. In the rest of Europe (Portugal, the Czech Republic and Poland) sales rose 32.8% to 2.5 billion guilders. The rise was mainly due to gains at Ahold's Portuguese shops. Ahold said activities in the Czech Republic showed a 'significant rise' but that sales in Poland were still 'limited.'

[08] Canon ditches $400m stake in Next Software

However, a Canon spokesman said the company's Canon Sales subsidiary will continue to sell Canon-branded computers made under an original equipment manufacturing agreement with a Taiwanese supplier. He declined to name the supplier.

The spokesman also declined to say how much Canon's 20% stake in Next Software is currently worth. In late December, Apple Computer of the U.S. said it had agreed to purchase Next for about $400 million.

Currently, Canon makes several models of personal computers under its Innova line. The spokesman estimated annual sales of Innova computers by Canon's sales unit at between 1.0 and 2.0 billion yen per year.

Canon is a major Japanese maker of office automation and precision optical equipment. In October, the company introduced five new bubble jet color printer models.

Earlier in August, Canon reported its consolidated net profit soared 89% to 40.29 billion yen on a 21% increase in sales to 1.221 trillion yen in the fiscal first half ended June 30. The same month, it said its unconsolidated pretax profit rose 114% to 63.74 billion yen for the same six-month period.

The month previously, the company revised upwards its forecast of unconsolidated profit for the current calendar year ending December 31. Canon said it now expects parent pretax profit to rise 46% over year- earlier levels, to 117.00 billion yen in 1996.

[09] Renault predicts stable market share in `97

The French car maker, in the midst of a cost-cutting drive aimed at reversing a 1996 net loss, said the near-stability of its market share will be due to the continued price war in Europe and particularly in France, where overall sales are expected to fall 10% this year. The European market is expected to be flat or to grow very slightly.

'We won't seek market share at any cost,' , Sales Director Patrick Faure said during a news conference on 1996 sales results. 'We don't want to buy market share, especially since we don't have the means to do so.'

Renault's sticker prices overall this year will increase less than 1%, noted Mr. Faure, although its hot-selling minivan for families, the Megane Scenic, saw its base sticker price rise 2% on January 1 to 102,000 francs ($19,270), up by 2,000 francs.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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