The day after that Williams Holdings made an unsuccessful hostile bid for the

The day after that, Williams Holdings made an unsuccessful hostile bid for the remainder of the group. After fending off Williams he then demerged the locks business Chubb in October 1992 Its value then was pounds 366m. Williams subsequently bought Chubb earlier this year paying three times that amount.Sir Ernest, 71, who joined the group the year after it was founded in 1950, refused to be drawn on whether this latest corporate restructuring would be his swansong, saying: “This company has a lot of shareholder value yet to be released and I would very much like to be around to ensure we achieve what is possible.”Racal Telecoms is a business telecoms operator which uses a network built around the national rail network. Racal would not be drawn on whether it would make a profit from the disposal.The data business has assets worth pounds 223m, of which pounds 90m is in the form of property and finance lease receivables.But the sale will result in a goodwill write back of pounds 112m and further unquantified provisions for restructuring.Together telecoms and data communications have sales of about pounds 600m a year. He demerged the mobile telephone business Vodafone in September, 1991. Once they are separated out, the remainder of the group consisting of defence electronics and the instrumentation, recording and survey business with sales of pounds 550m and annual profits of pounds 42m.This is the third radical reorganisation of the Racal group under Sir Ernest. The break-up marks the third time in a decade that the Racal empire has been restructured Michael Harrison reports.

The decision to float Racal Telecoms follows the group’s failure to find a trade buyer prepared to pay a high enough price. The business is expected to be valued at anywhere between pounds 500m and pounds 1bn when it is listed.
However, no timetable has been set for the flotation nor has Racal decided what proportion of the business will be sold off or how the proceeds will be used.Sir Ernest said: “We were seeking partnerships for Racal Telecoms which might enhance the business and we received many interesting offers but did not believe any of them gave shareholder value.”The data communications business, which employs 2,500 and made a loss of pounds 18.4m in the first half of the year, will be disposed of in the next three to six months.The investment bank Goldman Sachs is handling the sale and has already received several expressions of interest. Racal Electronics, the engineering group led by Sir Ernest Harrison, is to split itself in two by floating its Racal Telecoms business and selling the loss-making data communications division. Speculation that the group was lining up an acquisition was heightened when it confirmed that it would not be accelerating the share buyback program which has seen it buy in 3 per cent of its equity this year. “The last thing this company wants to do is stick with cash,” one expert explained. “The logical conclusion would be that they’ve got something lined up.”. After tax and transaction costs, the group expects the disposal to bring in “in excess of pounds 400m.” That would reduce its net debt, which stood at pounds 496m on 31 October, to under pounds 100m.

But Mr Gilroy confirmed that the group would be comfortable with current levels of interest cover, suggesting that LucasVarity could afford a big deal.Since the merger, it has added to its aerospace businesses while also making three bolt-on acquisitions for its braking division. It wasn’t really a surprise,” said Tim Bennett, engineering analyst at investment bank Morgan Stanley Dean Witter. He added that at a multiple of 19 times forecast earnings and 1.2 times expected sales, LucasVarity had secured a good price for the business.Industry observers now expect LucasVarity to use the proceeds of the sale to strengthen its aerospace and automotive businesses. “We concluded it would have been very challenging to develop a major on-highway business organically,” said Mr Rice, adding that building a position through acquisitions was not economically viable.Investors welcomed the sale, pushing up LucasVarity shares 1.5p to 192.5p in a falling market “VarityPerkins was always the likeliest disposal candidate. But environmental legislation is prompting the technology used in off-highway diesel engines to converge with the engines used in trucks and cars. At the time, chief executive Victor Rice claimed that VarityPerkins would benefit from sourcing Lucas’s fuel injection systems. He said joint research & development initiatives between the two divisions would “result in cost savings and enable the two businesses to compete more effectively on a global scale.”At the time, Mr Rice also predicted that VarityPerkins’s sales would almost double to pounds 1.3bn by the year 2000.Last night, Mr Gilroy admitted that those targets were no longer attainable.

In the three months to September, the group’s Diesel Engines division produced operating profits of pounds 13m on sales of pounds 157m – lower than in the second quarter, and roughly in line with the pro-forma figures for the third quarter of 1996.LucasVarity also said that more stringent environmental controls of diesel engines had prompted it to sell the business.VarityPerkins largely produces diesel engines for off-highway vehicles like earth-moving equipment, which have historically enjoyed less stringent emissions requirements. However, he claimed that this was mainly due to the strength of sterling, which had hit VarityPerkins more heavily than the rest of the group.LucasVarity’s third quarter results, which were also released yesterday, support that view. “VarityPerkins’ sales and margins are not as strong as expected,” he said. Peter Thal Larsen finds that the deal will give the automotive and aerospace engineer a sizeable war chest with which to beef up its remaining businesses. “The price beat our own internal valuation of the division, so it was right to sell it,” said chief operating officer Tony Gilroy.
Nevertheless, the sale contradicts the strategy mapped out for the business when Lucas and Varity announced their merger just eighteen months ago. Although the offer from Caterpillar had been unsolicited, the $1.32bn (pounds 803m) price tag made it impossible for LucasVarity to refuse. LucasVarity yesterday announced the sale of its VarityPerkins diesel engine subsidiary to Caterpillar, the US engine maker for $1.3bn.

So far National Power and Eastern have agreed to take 12 million tonnes from RJB next financial year while PowerGen has contracted to buy 4.5 million tonnes from other UK coal producers.. The Prime Minister Tony Blair announced on Tuesday that the three main generators had agreed a deal with RJB Mining to avert the threat of pit closures and redundancies for the next six months.The deal has yet to be thrashed out in detail but is likely to involve the three generators taking an extra 7-8 million tonnes of coal on top of contracts so far signed, either to burn or stockpile. It has 8,000 employees and made a net income of $340m on revenues of $3.2bn last year.Cinergy is one of seven or eight US utilities examined by PowerGen and although a final decision has not yet been taken, it is thought to be the group’s favoured takeover target.Mr Wallis refused to comment on PowerGen’s intentions but it is well known that he would like to acquire an interest in a UK regional electricity company.PowerGen executives vehemently deny suggestions, however, that it has offered the Government a deal to stop coal closures in return for the green light to own a Rec. Headquartered in Cincinnati, it serves 1.3 million electricity customers and 434,000 gas consumers in Ohio, Indiana and Kentucky and has a market capitalisation of $5.4bn.