Chris Jasper/LONDON Julian Moxon/PARIS


UK electronics specialist Racal has become the latest target in the current wave of European aerospace and defence consolidation, with France's Thomson-CSF and Germany's DaimlerChrysler Aerospace (Dasa) emerging as likely leading bidders for the company's defence electronics arm.

Increasingly acquisitive Thomson also continues to target Italy's Alenia as it seeks to diversify, having been left trailing by Europe's emerging "big three" players - Dasa, British Aerospace and Aerospatiale Matra - in the race to build up the critical mass needed to perform on the world stage.

Racal has been touted as a potential take-over target for some time, but as chief executive David Elsbury nears retirement at the end of this year, speculation is mounting over potential divestments. The company is thought to be willing to sell its defence electronics and telecommunications divisions to concentrate on a third division - industrial electronics.

Sources close to Racal say chairman Sir Ernest Harrison is keen to realise the group's value and, although a flotation strategy has not been dismissed, a sell-off seems more likely.

Racal Telecom, which contributed £297 million ($480 million) to a group turnover of £982 million in the year ended 31 March, is likely to prove most lucrative, but potential buyers for Racal Defence Electronics (turnover £372 million) are also emerging.

Earlly last month, Thomson-CSF chief executive Denis Ranque said he expected the UK market share commanded by soon-to-merge BAe and Marconi Electronic Systems to fall off, presenting new opportunities to his company. Thomson will therefore target "new alliances in the UK", he says, either through joint ventures or, in "less sensitive fields, ownership".

Of Thomson's 13,000 non-French European workforce, 6,000 are employed in the UK. Thomson and Racal have a common military telecoms subsidiary - Racal Thomson Networks.

Dasa, meanwhile, will not comment on any approach to the UK company, saying it is in talks with "all our European partners-for a speedy restructuring". Other names in the Racal frame include Raytheon of the USA and Smiths Industries of the UK. France's Sextant Avionique and the USA's Litton Industries and Honeywell may also be in the running.

Thomson-CSF declines to comment on suggestions that it is moving closer to Alenia as the Italian company shies away from BAe in its negotiations over the future of Alenia Marconi Systems.

Sources say Alenia is concerned that alliances with UK companies can become de facto take-overs "within five to 10 years".

Source: Flight International