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Monday, April 26, 1999 Published at 16:11 GMT 17:11 UK

Business: The Company File

GEC spends billions on US Internet group

GEC is shedding its defence heritage

The British electronics and telecoms giant GEC is buying a US Internet equipment business for $4.5bn (£2.8bn).

The acquisition is part of its drive to embrace the fast growing new media as its seeks to reinvent itself following the sale of its defence electronics business.

GEC is also keen to consolidate its position in the US telecommunications industry - which is by far the largest market for Internet equipment.

[ image: GEC hopes the deal will bring its US Internet business to the fore]
GEC hopes the deal will bring its US Internet business to the fore
GEC is paying $35 a share for US group Fore Systems, an Internet and technology equipment supplier. It supplies state of the art Internet hardware which can be used to switch data from overloaded lines to less congested ones.

The deal pleased the London stock market with shares in GEC climbing 4% after it was announced.

"We will now be in a position to capture the full benefits of the impact of the explosive growth of Internet and other data traffic on the demand for communications equipment and systems," said George Simpson, Chief Executive of GEC.

"The market's bullish on it because they've done a deal at last and the market likes activity," said one leading engineering analyst.

"Also this takes them into new Internet and data transfer technology and away from the old technology. That's a good move," he added.

Spending spree

The deal is the second large acquisition GEC has made since it announced the £7.7bn sale of its defence electronics business to British Aerospace.

The acquisition fits with GEC's £1.3bn deal to buy Reltec, a company which supplies the data to Internet users.

It also compliments its existing Marconi Communications high volume cable operating division.

GEC, the bulk of whose activities now go under the Marconi banner, said it plans to finance the deal with cash resources and bank facilities.

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