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Ericsson buys Marconi

£1.2bn for assets and name

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Ericsson is paying £1.2bn for the name and most of the assets of Marconi.

Marconi shareholders will receive 275p per share and keep ownership of Telent plc. Ericsson's chairman has reportedly said job cuts of up to 20 per cent will be unavoidable.

Ericsson gets Marconi trade marks, its optical networks business, the majority of its Access Networks business, its data networks and services business in North America and services business in the Middle East.

The remnants of the firm will be renamed Telent and focus on services for telcos and enterprises - it will be Ericsson's preferred partner in the UK. It will stay on the London Stock Exchange and will keep the UK telecoms business, UK and German services business and System X narrowband digital switches and the payphones business.

Marconi has been looking for a suitor since BT decided not to list it as a supplier for its next generation network.

John Devaney, Marconi chairman, said: "Over a period of several years we have had conversations with a number of potential partners regarding the necessary consolidation in our industry...The transaction delivers value to shareholders...also enables us to take steps towards resolving our UK pension plan issue."

Telent will be responsible for pension payments and will keep almost £500m in an escrow account to cover liabilities. Marconi will keep net cash of some £275m. Marconi said it was focussed on protecting the 69,000 UK pension holders - it is contributing £185m.

For the year ended 31 March 2005 Telent would have made sales of £336m and an adjusted operating profit of £37m. But as a result of the deal Telent will be left with more costs and it currently benefits from sales of legacy kit which is likely to decline over time.

The deal needs the usual regulatory approval and will be put before shareholders at an Extraordinary General Meeting on 21 December.

Ericsson shares rose on the news.

Gugliemo Marconi filed the first patent for communication using Hertzian waves in 1896. The Marconi Wireless Telegraph company was founded in 1900 - in 1901 it acheived the first transatlantic transmission.

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