Interesting Twist>
07/08/99 14:23 Predators scent blood as Ericsson
sacrifices chief
By Alexander Smith, European M&A correspondent
LONDON, July 8 (Reuters) - By sacking its chief executive,
Swedish telecoms group Ericsson <LMEb.ST> may have
handed its rivals a rare takeover opportunity.
But there are not many companies that could afford the
world's third-largest maker of mobile telephones, which on
Wednesday dismissed Sven-Christier Nilsson after just 15
months in charge, investment bankers told Reuters.
"You don't get many opportunities like this. But it needs
somebody with deep pockets," one said on Thursday.
Ericsson has a market capitalisation of around 514 billion
Swedish crowns ($60 billion).
"Overall it's a big ticket, there are not that many people who
can afford it. It is a group that a lot other companies have run
their slide-rules over," he added.
Persuading the powerful Wallenberg family and its Investor
AB investment vehicle either to back a bid or at least remain
neutral would be key to the success of any approach.
"If somebody with a credible industrial logic approaches, they
would listen," a senior banker at a U.S. investment bank, with
first-hand knowledge of Sweden, told Reuters.
Investor has 22.2 percent of the Ericsson voting rights, with
the Wallenbergs controlling a total of 38.8 percent. Another
large shareholder, Industrivarden, has 28.1 percent.
But the Wallenbergs take a patient approach to their
investments and may be willing to give Ericsson the benefit of
more time before sanctioning a takeover, the banker added.
Some were quick to draw parallels with the situation which
prompted one of the most audacious takeovers this decade,
Olivetti's <OLIV.MI> corporate raid on its five-times-larger rival
Telecom Italia <TIT.MI>.
"Now would be a great time to do it. Like (Olivetti's) Colaninno
going for Telecom Italia, the (Ericsson) management is
wobbling a bit," the banker said.
Colaninno made his bid for Telecom Italia only months after
the appointment of Franco Bernabe, who was charged with
turning the lumbering former state-owned telecoms giant into
a leaner, more efficent group able to take on Europe's top
players.
The vacuum at the top of Ericsson's management team has
sent investment bankers scurrying to put together takeover
proposals to tempt firms that may long have harboured
ambitions to take on the group but lacked the opportunity.
Canada's Nortel Networks <NT.TO> and Lucent Technologies
<LU.N> of the United States are both possible predators.
General Electric <GE.N> and Motorola Inc <MOT.N> might
also be tempted to sound out Ericsson's shareholders.
Anti-trust concerns could make a bid from Finland's Nokia
<NOK1V.HE>, Germany's Siemens <SIEG.F> or France's
Alcatel <CGEP.PA> harder to execute, the second banker
said.
Others said a deal with Internet network equipment maker
Cisco Systems Inc <CSCO.N> would make more sense.
Shares in Ericsson fell some 10 percent after Nilsson
resigned under pressure from the Ericsson board and
investors over the slow pace of a restructuring programme.
The group is already in the hunt for a new finance director.
The stock has gained some 30 percent during the first half of
1999, but has been outshone by Nokia, which has leapt by
nearly 70 percent, and U.Sd.
($1=8.540 Swedish Crown)
((European Equities Desk, +44 171 542 7719, fax +44 171
542 3722, email alex.smith@reuters.com)) REUTERS
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