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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: pat mudge who wrote (13296)	9/14/1999 10:45:00 AM
From: zbyslaw owczarczyk	Read Replies (2) \| Respond to of 18016

NN customer is expanding:LONDON, Sept 13 (Reuters) - Energis Plc said on Monday it was in talks to buy Racal Electronics Plc's (quote from Yahoo! UK & Ireland: RCAL.L) telecommunications division in a move that would marry its network along power lines with Racal's railway track system. Industry sources said Energis was set to pay 750-800 million pounds ($1.22-1.30 billion) for the Racal business to establish itself firmly as Britain's third national telecoms network after British Telecommunications (quote from Yahoo! UK & Ireland: BT.L) and Cable & Wireless (quote from Yahoo! UK & Ireland: CW.L). Energis could sign a deal within the next six weeks, the sources added. The firms themselves gave no details about the discussions. Shares in Racal jumped 7.4 percent on the news as analysts welcomed the possible sale which they said would unlock shareholder value in the company and leave Racal free to focus on its core electronics operation. Racal is also expected to dispose of the third leg of its portfolio, the defence operation, amid increasing consolidation in the industry. UNDERVALUED BY MARKET Salomon Smith Barney electronics analyst Mark Davies Jones said Racal's telecoms business had been undervalued by investors: ``Racal as a diversified holding company has not been able to get proper telecoms-type valuation for their telecoms assets.' Davies Jones said the minimum sum of the parts valuation for Racal was five pounds but he was looking to increase this by around 10 percent. Racal gained 28 pence to 405p by 1145 GMT. For Energis, Racal Telecom offers a complementary customer base with key clients in both business and government. But analysts said there would be significant duplication in network infrastructure. Energis' network covers some 6,500 km against Racal's 7,400 km. Energis shares, whose shares have surged from a stock market debut at 300p in December 1997, added 2.4 percent to 16.29 pounds. John Tysoe, telecoms analyst at WestLB Panmure, said the suggested price, representing more than four times Racal Telecom's 1998 sales of 177 million pounds, did not look unreasonable in today's turbo-charged telecoms market. ``If you've got the firepower, which Energis has, why not use it? It ties up the market, takes out a potential competitor and increases their customer base,' he said. Racal had originally planned to float its telecom arm, but Chairman Ernest Harrison signalled a change of tack last month when he announced he was open to the idea of a trade sale. INTERNET TRAFFIC Energis, headed by Chief Executive Mike Grabiner, is a long-distance carrier spun off from utility National Grid Group Plc (quote from Yahoo! UK & Ireland: NGG.L). It is a leader in UK Internet traffic after buying Planet Online a year ago, and it provides network infrastructure and connections for top Net service provider Freeserve Plc (quote from Yahoo! UK & Ireland: FRE.L). Energis, which uses the power line network of National Grid, floated off from its parent in 1997. National Grid still holds 49 percent of the shares. The current Racal/Energis discussions do not involve Racal Translink or Racal Fieldforce which were separated from Racal Telecom at the beginning of the year. Racal Translink is a provider of transport infrastructure services while Fieldforce is a maintenance business. Racal has been considering the future of its telecoms arm, much of whose fibre optic network runs alongside Britain's railways, for the last two or three years. Energis posted annual pre-tax losses of 31.1 million pounds in May, down from 62.01 million a year earlier. (Additional reporting by Alessandra Galloni and Andrew Langlands)