TCL, China's largest television maker, and its French rival Thomson are planning to create the world's biggest TV maker with sales of more than ?bn.

The two groups are on Monday expected to announce the merger of their TV and DVD-player manufacturing activities.

The Chinese group will own 67 per cent of the venture, to be called TCL-Thomson, with the remainder held by the French group. Charles Dehelly, Thomson's chief executive, travelled to China over the weekend to sign a binding memorandum of understanding with TCL.

TCL-Thomson will have about 20,000 employees and ship about 18m units this year. The deal is subject to final agreement and regulatory approval, which are expected to be completed in the first half of 2004.

After 18 months, Thomson will have the right to swap its stake for a similar-size holding in TCL International, the Chinese group's Hong Kong-listed subsidiary. Otherwise, the French group's stake is subject to a three-year lock-up period.

Although TCL is little-known overseas, it has made no secret of its global ambitions. The company - which is also one of China's biggest mobile handset makers - has explored a range of possible partnerships to establish itself abroad.

For Thomson, which makes the leading RCA brand in the US, the deal completes a long search for a solution to the deepening losses at its TV and DVD-player operations. "Thomson's business and prospects are transformed by this agreement," said Mr Dehelly.

The French group - which was almost sold for a single symbolic franc to Daewoo of Korea in 1997 - has spent about ?.5bn on a string of acquisitions over two years. The spree has transformed it from a consumer electronics maker into a "video and media solutions provider".

Today's deal should be welcomed by analysts, who have long called for both companies to find a partner. TCL has been seeking the expertise and brand recognition needed to expand abroad and Thomson needs a cheaper manufacturing base.

In a report last week, UBS said: "If Thomson successfully sets up the colour TV joint venture, the group's [margin on] estimated 2005 earnings before interest and tax could exceed 11 per cent compared to the 6.4 per cent average achieved since Thomson's initial public offering in the fourth quarter of 1999."

Shares in both companies have rallied strongly amid speculation on a deal. Thomson gained 14 per cent last week to close at a new year high of ?8.12, while TCL gained 24 per cent to HK$2.82, close to a three-year high.

TCL has been working hard to raise the quality of its products to international standards. The Chinese group acquired the bankrupt German TV maker Schneider Electronics last year after failing in 2001 to buy Philips' Magnavox brand.

Close

Today's Top News		Top Business News
+Premier: United all of Asia will win ( 2003-11-03) +Navy fleet visit heart of US forces in the Pacific ( 2003-11-02) +Future SARS details to come quickly ( 2003-11-03) +Chief economist: Revalue RMB 'a serious mistake' ( 2003-11-03) +First a man, now moon for space programme ( 2003-11-03)		+Global chip sales up 17.5 percent in third quarter ( 2003-11-03) +Thomson and TCL plan merger ( 2003-11-03) +Expert warns on over-expansion of oil refineries ( 2003-11-03) +Some U.S. furniture makers seek trade sanctions on China ( 2003-11-03) +Manufacturing town floors its rivals ( 2003-11-03)