France's month-old leftist government canceled plans on Friday to privatize defense and electronics giant Thomson-CSF, saying a sale is not in the interest of the company or the state.
The announcement marked the first time the new government had reversed plans to sell a state-controlled business.
Socialist Premier Lionel Jospin had said his government would review, case by case, companies scheduled for privatization by the previous conservative government. Sales must be deemed "in the national interest," Jospin has said.
A statement from Jospin's office said the privatization of Thomson is not in the interest of "the state, the company or its employees."
The statement added that France would, in the coming weeks, develop a new plan to integrate the company into the streamlining of Europe's defense industry.
Thomson, which is 58% owned by the government, will become part of a "French defense and electronics grouping with a controlling state-owned stake," the premier's office said. "This solution is part of efforts meant to reinforce the defense industry in Europe."
The previous conservative government led by Premier Alain Juppe was in the process of privatizing major French companies in a bid to make them more competitive.
The conservatives lost power in June 1 parliamentary elections, won by an alliance of leftist parties led by the Socialists.
In April, the previous French government rejected a bid for Thomson by Britain's General Electric, citing national security concerns.
In May, French engineering giant Alcatel Alsthom--in conjunction with Dassault Industries and Lagardere--officially submitted bids for Thomson. Privatization had been slated for June.
The Alcatel and Lagardere bids spurred other alliances with other European defense companies--moves that analysts say are needed to compete with U.S. defense giants.
The cancellation of the Thomson privatization could delay those alliances.