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China's Huawei declines comment on Marconi bid

Huawei Technologies Co (華為技術), China's biggest maker of telecommunications equipment, declined to comment on a Sunday Times newspaper report that the company is in talks to take over Marconi Corp, a British manufacturer of phone equipment.

"We don't comment on speculation about our business activities," Fu Jun, a Huawei spokesman in Shenzhen, said yesterday. Huawei, founded in 1988 by former Chinese army officer Ren Zhengfei (任正非), in January signed an agreement with Marconi to jointly distribute each other's products and to cooperate on research and technology.

A transaction could value Marconi at more than ?600 million (US$1.06 billion), the Sunday Times reported on Sunday, citing unidentified people familiar with the discussion.

"We are not going to comment at this stage," David Beck, a Marconi spokesman in London, said on Sunday.

Huawei's possible purchase of Marconi would follow other Chinese companies looking to benefit from foreign expertise and markets through acquisitions. Lenovo Holdings Ltd (聯想), China's biggest personal-computer maker, completed its US$1.25 billion purchase of International Business Machines Corp's PC unit in May, and TCL Corp bought a majority stake in a Thomson SA venture last year to become the world's biggest maker of TV sets.

"It would be a good move for Huawei, as it would immediately raise its international visibility as Marconi is an established brand name, and accelerate the company's overseas expansion plans," said Zhou Yi, an analyst at Analysys International (易觀國際), a Beijing-based technology market researcher, who estimates the deal at about US$1 billion.

Even so, the proposed deal would meet resistance in the UK on concern about the loss of jobs as more Chinese companies eye acquisitions of troubled companies, Zhou said.

Last month China's Nanjing Automobile Group Corp (南京汽車) bought bankrupt UK carmaker MG Rover Group Ltd for an undisclosed sum after talks with Shanghai Automotive Industry Corp failed.

Nanjing Auto paid "a little more than" ?50 million for MG Rover, the Financial Times reported on July 23, citing unnamed sources.

China National Offshore Oil Corp (中國海洋石油), China's third-largest oil producer, last week dropped an US$18.5 billion offer for Unocal Corp, the largest overseas acquisition attempted by a Chinese company.

A formal proposal has not been sent to Marconi's board and the two companies' existing partnership to distribute each other's products does not mean a merger is certain, the Sunday Times said, adding that Marconi was also pursuing options including talks with other companies.

Marconi is represented in the discussions by Morgan Stanley, and Huawei brought in UBS AG as adviser, the UK newspaper said.

Last week Marconi reported its fiscal first-quarter loss widened to ?36 million after the company failed to win a contract from BT Group PLC, its biggest customer, and had to take a reorganization charge. Sales at continuing operations fell 1.4 percent to ?285 million.
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