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Lockheed, Britain's GEC May Be in Merger Talks

Aerospace: Combined company would be worth more than $40 billion. Recent speculation has pumped up stocks.

December 28, 1998| From Bloomberg News

LONDON — General Electric Co. of Britain is reportedly in talks with Lockheed Martin Corp. to combine and create a company valued at more than $40 billion, the Sunday Telegraph reported without citing its sources.

The report comes amid speculation in the British media and among investors about possible partners for GEC and its larger rival, British Aerospace, that has driven share prices higher this month. The two London-based companies may also be in talks with each other, the Sunday Times reported a week ago.

"We've made no secret of our interest in the U.S. market and have indicated we would be interested in linking with a company there," said GEC spokesman Ben Brewerton. "Lockheed is one of the options."

Lockheed Martin's West Coast spokeswoman Gail Rymer declined to comment Sunday on the news report, saying: "As a matter of policy, we don't discuss plans of the corporation in future business areas."

Shares of GEC, Britain's second-biggest defense contractor, have risen 18% this month on speculation about a merger or buyout, and they reached a record high of $9.33 last Monday, a day before the company announced plans to spin off its Marconi defense contracting division.

Shares of Bethesda, Md.-based Lockheed Martin fell 38 cents to close at $84.13 on the New York Stock Exchange on Thursday.

GEC is "having a number of discussions. There is good momentum, and a decision will be announced soon," Brewerton said.

Any combination of GEC and Lockheed would be a blow for BAe, Europe's largest defense company, which has links with Lockheed on programs such as the joint strike fighter.

GEC's decision to split its aerospace and defense operations from its industrial businesses is likely to have changed the nature of its talks and possibly the companies with which it is talking.

The Sunday Times reported that Thomson-CSF, a French defense-electronics maker, is preparing plans to merge with Marconi because it would now be a merger of equals. The French government may have given its approval for Thomson-CSF to proceed with such a merger, the newspaper said without citing sources.

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