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Racal rockets on bid hopes
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January 4, 2000: 4:20 a.m. ET
Thomson-CSF confirms approach to $2.7B British electronics maker
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LONDON (CNNfn) - Racal Electronics stock bounced almost 10 percent Tuesday after the British firm confirmed widespread press speculation that it’s targeted for a possible takeover by France's Thomson-CSF.
Thomson admitted it had made an approach, but poured cold water on any hopes investors might be offered a huge premium for their shares. In a statement the French electronics firm confirmed it made an approach in November, adding, "at that time the average share price [of Racal stock] was significantly lower" than the recent level.
The two companies could not agree on a price for Racal, which has a market value of 1.7 billion pounds ($2.7 billion). However, Thomson, which continues to be part-owned by the French state, said it would still like to do a deal.
Racal shares rose more than 9 percent in early trading in London Tuesday, the U.K. stock market’s first business of the new millennium.
Talks between Racal and Thomson over the sale of the British firm's defense electronics assets broke down last year, but since then Racal has slimmed down considerably by selling its telecom division to Global Crossing (GBLX) for $1.7 billion and handing the cash back to shareholders.
The European defense industry has undergone significant consolidation over the past year, as European politicians encouraged the creation of major groupings to combat U.S. giants such as Lockheed Martin (LMT) and Raytheon (RTN). BAE Systems (BA-), for instance, was created last year when British Aerospace bought the defense business of U.K. rival General Electric Company (GEC).
DaimlerChrysler Aerospace and France's Aérospatiale-Matra are in the process of merging to create an industry giant with annual revenue of $23 billion. 
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