Marconi in £1.2bn Ericsson deal

Telecoms equipment firm Marconi has agreed to sell the bulk of its assets and its name to Swedish firm Ericsson in a deal worth about £1.2bn ($2.1bn). The deal will see Marconi’s telecoms equipment business bought by Ericsson, leaving the UK firm with its services business, which will be renamed Telent. Marconi shareholders are set to receive 275 pence per share once the sale is concluded.

As reported earlier in Comms Business Magazine, Marconi’s future has been in the balance ever since it missed out on a major BT contract earlier this year. Marconi had warned that it would lose out on £50m when it was announced in April that BT had decided not to select it as one of eight companies to work on a £10bn upgrade of its network.

After missing out on the contract the firm carried out a strategic review of its options. This led to cost-cutting measures including the axing of 800 jobs and the closure of the group’s Edge Lane plant in Liverpool where the company began life in 1903.

Marconi currently has about 9,000 staff worldwide. Of these, 2,000 workers in the UK will be retained in the Telent business.

The deal with Ericsson will see an injection of £185m into Marconi’s pension plan to protect the members’ rights. An additional £490m will be retained in an escrow account for the potential benefit of the plan.

“Over a period of several years, we have had conversations with a number of potential partners regarding the necessary consolidation in our industry,” said Marconi chairman John Devaney. “In Ericsson, we have found a partner that has the scale and global reach to take our equipment business forward in a way that we would not have been able to do alone.”

Carl-Henric Svanberg, chief executive of Ericsson, said the deal to buy Marconi’s businesses had “a compelling logic and is a robust financial case”.