French Gov't. Reducing Stake In Thomson

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PARIS -- In order to help expand its new media services initiatives, Thomson Multimedia today confirmed that the French government will reduce the 51.7 percent stake it owns in Thomson, essentially privatizing the consumer electronics producer, although the French government would remain a major shareholder.

Exactly what percent of Thomson the government would retain has not been announced, but will be decided in the next few months, with the new "market operation" to raise capital likely to occur in September. The value of this transaction to Thomson is expected to exceed $600 million -- more than Thomson raised in its IPO last November.

Thomson also announced today that its stock will split two-for-one tomorrow, June 16, increasing the liquidity of shares. The split will affect ADRs listed on the New York Stock Exchange as well as shares traded here. The number of ADRs owned by each ADR owner will be multiplied by two, and each ADR will still represent one ordinary share. Shareholders had voted for the split at the shareholders meeting on May 26. Thomson trades as TMS on the New York exchange.

This support by the French government for Thomson's ongoing development strategy -- which states that Thomson plans to become the leading platforms/interactive services company, focusing on consumer entertainment products -- follows by one day the announcement that Thomson and Alcatel would create a joint venture in the field of interactive multimedia networks. The Alcatel agreement followed last Monday's announcement that Thomson, DirecTV and Microsoft were working together on a satellite-based digital video recorder.

Said the French Ministry of Economy, Finance and Industry about its divestment, "Thomson Multimedia must have at its disposal the means to finance its development and, in particular, any potential acquisitions."

Thomson's affiliation with the French government goes back three years to 1997, when the government acquired 100 percent of Thomson, rather than Thomson selling the company to Korea's Daewoo Electronics. Other equity partners -- joining with Thomson in 1998 -- are Alcatel, Microsoft and NEC, which all own a 6.8 percent share, and DirecTV, which owns 5.2 percent. At the time Thomson launched its IPO in November of last year, the French government retained a 51.7 percent controlling stake.

Yesterday, Thomson and Alcatel agreed to form a new company that would tie together their activities in MPEG network products, multimedia head-ends and Hybrid Fiber Coax solutions for cable TV networks.

The two companies expect the new company to immediately be a leader in the European market for digital Interactive Video Networks, and they intend to pursue an aggressive development strategy in the United States to become one of the worldwide leaders in what is expected to be an explosive market.

The new company, expected to be operating within three months, will address new markets in interactive video. The development of standards to process and transport video signals digitally, such as MPEG, Digital Video Broadcasting and the Advanced Television Standards Committee, has created a new market for digital video networking systems to carry the video signal from studios to users.

Initially mostly broadcast, these networks will become increasingly interactive, allowing customers to access video servers in the same personalized way they use the Internet today. By pulling on its own resources and the resources of its parent companies, the new company will be able to offer end-to-end solutions for all types of network configurations. It also is hoped the venture with Alcatel will allow Thomson to break into the U.S. cable market.

Navigation and search services, interactive and personalized services and dedicated service for television, such as its electronic program guide for RCA TVs, are three pillars for Thomson's new media services strategy, said the company. But, first, Thomson said it will need to further develop market positions and brands in finished consumer products The company also said it will expand its digital product line and its geographic coverage.


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