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     T R O U B L E D   C O M P A N Y   R E P O R T E R     

                       E U R O P E

         Thursday, May 4, 2000, Vol. 0, No. 16

                       Headlines


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F R A N C E
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SNECMA: To Sell Auto Business to Valeo
VEBA AG: German Utilities Being Investigated by US SEC


=========
I T A L Y
=========

ALITALIA: Reviews Alliance Options


===========================
U N I T E D   K I N G D O M
===========================

AB PORTS: Rejected an Offer from Nomura
BLUE CIRCLE: French Firm Makes a o3.65 Billion Hostile Bid
HYDER PLC: Water Firm Faces Bid Fight
P&O STENA: Ferries Arm Posts Losses of o11m
ROVER CAR: Brussels Threatens to Block Aid Package
R. WISEMAN DAIRIES: Accused of Market Sharing Arrangement
SCOTTISH & NEWCASTLE: Initiates Sale of UK Holiday Centres
THUS PLC: Fiscal Loss From Operations at 9 Million Pounds
UNION PLC: Posts Pretax Loss of 3.14 Mln Stg
VODAFONE AIRTOUCH: Faces o20bn Bill for Licences


===========
F R A N C E
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SNECMA: To Sell Auto Business to Valeo
--------------------------------------
State-owned aero engine maker Snecma [SNEC.CN] said on Tuesday it
had agreed to buy Sopartech, a holding company which is the
majority owner of aeronautics and auto equipment maker Labinal.

The bid values Labinal at 1.1 billion euros.

Snecma said shareholders in Sopartech -- which owns 49.38 percent
of Labinal and 64.90 percent of its voting rights -- had agreed
to the bid based on price of 135 euros per Labinal share. When
Snecma has bought Sopartech, it will then launch a bid for
Labinal at 135 euros, with the dividend included.

Once in charge of Labinal, Snecma will split the company up,
selling its auto equipment activities to France's Valeo and
folding its aero engine businesses into Snecma. Valeo unveiled
the terms of its bid for Labinal's auto cabling unit Sylea
earlier on Tuesday.

The move fits into the government's strategy of consolidating
France's aerospace and defence interests and the Finance Ministry
said in a separate statement the deal was a new step in European
defence consolidation into sectors.

Meanwhile analysts have called for Labinal to focus its
activities either on autos or aerospace. Shares in Labinal and
Sylea were suspended on Tuesday.


VEBA AG: German Utilities Being Investigated by US SEC
------------------------------------------------------
Financial Times    May 2, 2000

Veba, the German utility, on Tuesday confirmed that it was being
investigated by the US Securities and Exchange Commission.

The move highlights the issue of corporate transparency for
German companies planning dual stock exchange listings and
illustrates a long-standing lack of transparency among many
German companies.

The development raises questions over which corporate governance
and merger rules are to apply on the planned joint London-
Frankfurt stock exchange. A merger announcement is expected on
Wednesday.

Veba, Germany's largest utility, said that the SEC was probing
comments it made before it announced plans to merge with rival
Viag late last summer.

During the period under investigation, Veba had explicitly denied
merger negotiations to journalists three days after the German
chief antitrust authority confirmed that the two utilities had
paid it a joint visit.

Veba reiterated denials until September 1, when it confirmed that
it had agreed a merger framework with Viag. The formal merger
announcement followed on September 27.

The issue is particularly noteworthy since German and SEC
regulations widely differ. Recently, a growing number of German
blue- chip and high-growth companies has been opting for a second
listing on the New York Stock Exchange and Nasdaq, respectively.

Under German rules supervised by the Federal Securities
Supervisory Office, companies are only obliged to announce a
merger once they have reached a formal agreement.

The German supervisory office said, "It is up to the firms to
decide when something is relevant for the stock markets.
Naturally, we supervise it."

As is usual, the SEC on Tuesday would neither confirm nor deny
the existence of such an investigation.

The investigation is likely to be informal since Veba has
volunteered to co-operate with the SEC and hand it all the
information it requires. It is understood that the SEC could also
sub-poena the company.

While the SEC could choose from a wide range of actions, it is
likely to either publicly reprimand or fine Veba if found guilty.


=========
I T A L Y
=========

ALITALIA: Reviews Alliance Options
----------------------------------
Financial Times   May 2, 2000

Alitalia's board on Tuesday night said it would seek alternative
alliances with other carriers following the collapse of the KLM
Royal Dutch Airlines partnership.

The airline's board also decided to put in an escrow account the
E100m ($90.6m) KLM had invested in Milan's Malpensa hub airport.
KLM is claiming reimbursement of this sum following its decision
to break off the partnership.

Domenico Cempella, Alitalia chief executive, also held talks with
senior officials in the prime minister's office over the
airline's future alliance strategy.

Italian airline officials suggested Swissair as the preferred
alliance candidate. But the Swiss airline on Tuesday claimed it
was not interested and already had partners in Italy through its
45 per cent stake in Air Europe and Volare.

Officials also continue to consider Air France as another
possible partner, although they argued that it would be easier to
reach an agreement with a smaller airline such as Swissair.
KLM's decision on Friday to break off its two-year partnership
with the Italian flag carrier has provoked considerable
consternation and anger in Rome.

Mr Cempella yesterday described the KLM move as "inexplicable" in
an internal newsletter to the staff of the state-controlled
airline.

KLM said it had broken off the partnership because of continuing
problems at the new Malpensa hub airport of Milan and delays in
the privatisation of Alitalia, 53 per cent owned by the IRI state
holding company.

Mr Cempella also told staff that Alitalia had maintained contacts
with other carriers during its two-year alliance with KLM. It had
been speaking to other airlines to widen the scope of its now
defunct KLM alliance.

Alitalia's shares fell more than 5 per cent when the Milan stock
exchange opened on Tuesday but recovered to close 0.45 per cent
higher at E2.205.


===========================
U N I T E D   K I N G D O M
===========================

AB PORTS: Rejected an Offer from Nomura
---------------------------------------
The Independent    May 3, 2000

Associated British Ports, the UK's biggest ports owner, yesterday
rejected an offer from Nomura, the Japanese investment bank, that
was thought to value the group at o1.1bn.

The company said: "The board of ABP confirms that it has received
an informal approach from advisors to a third party. The approach
was at a level which would significantly undervalue the company
and its prospects."

The offer was received late last week but it is believed that no
talks are continuing. ABP was forced to acknowledge the approach
after weekend press reports. It is thought that the offer was
pitched at around 320p a share, well above Friday's closing share
price of 264p. No formal offer was made. Yesterday, ABP shares
gained 49.5p to close at 313.5p.

A source said ABP showed no inclination to discuss the offer,
despite indications that more money could be made available.

Nomura's principal finance team, led by Guy Hands, has never made
a hostile bid. Sources said they had no intention of going
hostile in their approach to ABP. "Nomura looks at some 150 deals
a year. It doesn't have to do this one. It is not going to
strong-arm them. It approached them on a friendly basis. They
[ABP] said there was nothing to talk about and walked away. They
were not willing to explore. It was not very helpful," he said.

Alastair Gunn, an analyst at Credit Lyonnais, said: "Institutions
are not great lovers of this company, so 350p-375p should be
enough to secure it, if no other bidder emerges. The big wild
card is whether P&O [the transport group] will come in. They
could use it as a cash cow to fund overseas expansion." He also
said part of ABP's defence could be the announcement of another
shares buyback programme, funded by selling some of the land
holdings around its ports.

John Lawson, an analyst at WestLB, said a knock-out blow would
need to come in at 400p a share. "ABP has some wonderful assets
and a solid earnings flow. It would cost a fortune to build these
ports." ABP owns 23 ports, including Southampton and Hull, and
handles a quarter of Britain's seaborne trade.


BLUE CIRCLE: French Firm Makes a o3.65 Billion Hostile Bid
----------------------------------------------------------
The Times   May 2, 2000

ONE of the closest-run City takeover battles in years comes to a
head tomorrow when Blue Circle Industries, Britain's biggest
cement producer, learns whether it will escape a o3.65 billion
hostile bid from a French rival.

Lafarge is offering 450p a share for Blue Circle, but City
analysts believe that the offer, while 30p higher than an initial
sighting shot, may not be sufficient to win over fund managers.

Lafarge has 29.9 per cent of its target, bought on the stock
market. But there has been a groundswell of support for Blue
Circle, with some of the biggest funds coming out in its favour.

Blue Circle was forced to distance itself from a report at the
weekend claiming it already had the support of holders of 45 per
cent of its equity, just short of the total required to secure
its continued independence, and most observers accept that it is
too close to call.

However, even if the British company survives the week, its board
may eventually have to strike a deal. As part of its defence,
Blue Circle plans an o800 million share buyback, half immediately
after the Lafarge offer lapses and the rest at the end of the
year.

If, as expected, Lafarge refuses to participate in this, its
stake would increase to 38 per cent, providing a strong platform
to strike an agreed deal.

Under the City Takeover Code, if they fail this week the French
cannot return with a hostile bid for a year. But they are not
precluded from reaching an agreed settlement, perhaps at a higher
price to the current offer.

The Financial Times further stated that the outcome of the
increased o3.65bn cash offer will be decided on Wednesday, with
the passing of the 1pm deadline for investors to accept or reject
the bid by Lafarge of France.

Confusion surrounded the destination of a parcel of 8m shares, or
about 1 per cent of the total, sold by Mercury Asset Management
at 439p a share.

It was unclear whether this had gone to a supporter of Blue
Circle or an organisation intending to accept the offer.

MAM has been a seller throughout the bid, reducing its holding
from 3.15 per cent in early February, although it still holds
9.18m shares or 1.13 per cent.


HYDER PLC:  Water Firm Faces Bid Fight
--------------------------------------
Reuters    May 2, 2000

Welsh utility company Hyder Plc became a subject of a potential
intense bid fight on Tuesday with a U.S. group challenging an
agreed bid made by Japan's Nomura Securities .

The new approach came from Western Power Distribution (WPD), an
electricity distribution business jointly owned by PPL
Corporation and Southern Company Inc. PPL is the senior partner
with 51 percent in the group.

The approach follows Nomura's agreed 2.3 billion pound ($3.60
billion) deal on April 18, which included 402 million pounds in
cash and assumption of 1.9 billion pounds of debts. It offered
260 pence for each Hyder share.

The first signs of a scrap between the Nomura and WPD emerged on
Tuesday when Barclays Capital pulled out of backing a vehicle in
which WPD was planning to hive off its wholly-owned unit Dwr
Cymru Cyfyngedig.

WPD had initially announced Barclays Capital's financial backing
in the morning and industry sources familiar with the deal said
Barclays Capital pulled out following "pressure from Nomura" as
the Japanese bank and the Barclays unit have worked together on
several deals.

Neither Barclays Capital nor Nomura were immediately available
for comment.

WPD is expected to choose the financial backer who will replace
Barclays Capital on Wednesday. "There are several interested
parties," one source said.

Earlier WPD said it intended to seek a recommendation from
Hyder's board at a premium to the current offer.

It did not give any price range but an industry source told
Reuters the group could offer a price of around 285 pence per
share, which would value Hyder's equity at around 440 million
pounds.

Hyder's shares closed 33 pence up at 283-1/2 pence, up 13.20
percent.

The water group responded by saying it was seeking further
clarification on WPD's announcement.

Another industry source said Hyder was seeking information on the
price and also more details on the possible hive-off of Dwr
Cymru, Hyder's Welsh water business.

As part of a broader arrangement, Dwr Cymru will sign an
operation and management agreement with United Utilities, a UK
provider of water and wastewater services in northwest England.

Nomura, a specialist in reviving struggling firms, had said it
had no plans to sell Hyder assets but it did not rule out selling
some of its non-regulated businesses.

WPD is being advised by Schroders while Hyder was advised by
Dresdner Kleinwort Benson. Nomura was advised by Warburg Dillon
Read.


P&O STENA: Ferries Arm Posts Losses of o11m
-------------------------------------------
Financial Times   May 2, 2000

The end of bargain duty-free shopping trips and a post-millennium
hangover caused P&O Stena Line ferries to sink o11m into the red
in the first quarter.

P&O said the cross-Channel joint venture lost volume and market
share for tourists and freight.

Other ferry operations also saw a downturn in tourists, although
freight increased during the first three months of 2000.

P&O said the abolition of duty-free last summer caused the
company to shift away from bargain booze trips previously
subsidised by high retail margins.

The company said higher average fares, a slow market following
big spending over new year and a late Easter in the second
quarter were to blame. It added that higher volumes should start
to feed through soon.

"We hope that will happen in the peak season in the summer with
the strong pound and increased leisure time," it said.

P&O Stena Line, the dominant ferry business, saw passenger
numbers fall by more than 20 per cent, although its share of the
generally declining market post duty-free slid only marginally
from 29 to 28 per cent.

Freight volumes fell nearly 4 per cent, with P&O Stena's share of
the growing market eroded by three new Eurotunnel freight
shuttles.

A pre-tax loss of o11.4m compared with profits of o3.5m in the
comparable period.

Analysts said the losses were slightly more than forecast,
although the figures generally were in line with expectations.

All eyes are now on the second quarter figures; if they come in
below expectations, some analysts will consider cutting full-year
projections for a loss of about o20m.


ROVER CAR: Brussels Threatens to Block Aid Package
--------------------------------------------------
Financial Times    May 2, 2000

The prospect of a UK government-backed rescue of Rover, the loss-
making carmaker owned by Germany's BMW, faded on Tuesday amid
warnings that the European Commission would block any aid
application.

The warnings, from British advisers in Brussels, came as it
emerged that Alchemy Partners, formerly BMW's preferred bidder
for Rover Cars, has drawn up revised proposals after the collapse
of buy-out talks last week.

Alchemy's renewed involvement - including contacts with BMW in
Munich and senior officials at the department of trade and
industry - coincided with the first meeting between the German
carmaker and the Phoenix consortium, an alliance of businessmen
hoping to preserve Rover as a volume carmaker.

John Towers, Phoenix consortium leader, emerged from the day-long
talks describing them as "detailed and positive".

He said: "We have identified the relatively small number of items
that our teams have to work on this weekend and it's all moving
in the right direction."

Union leaders have urged the government to support the consortium
with o152m ($236m) in grant aid.

Officials in Brussels, however, do not believe that Phoenix would
qualify for such aid, originally offered to BMW last year to
persuade it to redevelop Longbridge, the UK's largest car plant.

That aid was available only to prevent BMW shifting Rover
production outside the European Union.

Government advisers also fear that Mario Monti, the competition
commissioner, would be reluctant to approve a grant under the the
EU's rescue and restructuring regime - reserved for companies
facing collapse.

Any application would be subject to a four-to-six month
investigation. But BMW plans to sell or close Rover Cars by the
end of May.

Michael Heseltine, former Conservative deputy prime minister,
will on Wednesday step up pressure over Rover and Ford, which
plans to stop car assembly at Dagenham, east London, by linking
job losses in UK manufacturing with the Labour government's
failure to take a more positive line on euro membership. The
strong pound, he will say, is "part of the price of closing the
door on the single currency".


R. WISEMAN DAIRIES: Accused of Market Sharing Arrangement
---------------------------------------------------------
Financial Times   May 2, 2000

The Competition Commission has intensified its inquiry into
Robert Wiseman Dairies, the dominant Scottish milk processor,
which is accused of operating a 'market sharing arrangement'.

The Commission announced provisional findings that Wiseman
benefited from a monopoly in Scotland, where it has between 70
and 85 per cent of the milk market.

It will now investigate whether the company is guilty of
overpricing and preventing new competitors from establishing a
foot-hold in the Scottish market.

The Scottish fresh milk industry was referred to the Commission
by the Office of Fair Trading in February after allegations of
"market sharing, price discrimination, exclusive dealing and
predation".

Claymore Dairies, a Scottish milk-processing company half-owned
by Express Dairies, said it had suffered anti-competitive
practices after it withdrew from a market sharing arrangement
with Wiseman in 1998.
Wiseman, which denies all allegations of anti-competitive
behaviour, said it was confident of being cleared in the
Commission report, which is due to be completed by November 2.

If the report finds against Wiseman, the trade and industry
secretary could force it to divest some of its business. Analysts
thought it more likely the sanctions would be limited to
conditions being placed on its trading. But one analyst said the
report's conclusion was not a foregone conclusion. "It is too
early to judge the outcome."

"The arrival of Express Dairies in Scotland in 1998 has created
such severe new competition that the Commission may decide there
is no longer a case to answer", he added.

The news that the inquiry is going ahead is the second blow to
Wiseman in the space of a week after Unigate, the milk and cheese
group, accepted a o235m offer from Dairy Crest in preference to
Wiseman's o225m rival bid.

Analysts said it was unlikely Wiseman would return with an
increased offer, despite its determination to increase its
presence in the English market.

Its apparent failure in the battle for Unigate could see it
resume stalled merger talks with MD Foods, the Leeds-based
subsidiary of the Danish farmers' co-operative, best known for
its Lurpak butter but also a sizeable operator in the UK liquid
milk market.

Analysts warned, however, that the cloud hanging over Wiseman
during the Commission's inquiry could scare off potential merger
partners.

Shares in Wiseman remain suspended at 831/2p because of its bid
for Unigate, which is a much larger business than its Scottish
suitor.

According to The Independent newspaper, the commission's
investigations will concentrate on the so-called middle ground of
the market between domestic milk deliveries and the major
supermarkets. This principally consists of corner shops, caterers
and public bodies such as schools and hospitals.

It will also seek to establish whether Robert Wiseman's
aggressive reputation acted as a barrier to other players
entering the market. Possible remedies could include forced
disposals or guarantees over pricing.


SCOTTISH & NEWCASTLE: Initiates Sale of UK Holiday Centres
----------------------------------------------------------
Financial Times    May 2, 2000

UK brewery group Scottish & Newcastle on Tuesday kicked off the
sale of Pontin's UK holiday centres, which analysts value at
about o30m ($47.4m).

A colour brochure detailing the eight sites - which are to be
sold as a single package - was sent to prospective buyers by
Humberts Leisure and DTZ, which are handling the sale. Another
six leisure sites will be sold separately.

S&N said in March it would dispose of its holiday interests to
focus on brewing. The first round of bids for the Center Parcs
holiday business ended on Friday and a shortlist of bidders is
expected to be determined by the end of the week.

Bidders for Center Parcs are understood to include trade and
financial buyers and the business has drawn overseas interest.

Financial buyers are thought to include CVC Capital Partners.

Analysts value the business at o700m-o850m. Morgan Stanley Dean
Witter is conducting the auction.

S&N is marketing Pontin's and Center Parcs separately because of
differences between the businesses. Center Parcs is aimed at the
top end of the market and has overseas sites, while Pontin's is
more downmarket.

The sales will help fund S&N's o1.7bn purchase of Danone's beer
businesses in France, Italy and Belgium.


THUS PLC: Fiscal Loss From Operations at 9 Million Pounds
---------------------------------------------------------
Bloomberg   May 3, 2000

Thus Plc, a telephone and Internet company controlled by
ScottishPower Plc, posted a loss from operations in fiscal 2000
as administration and network-construction costs rose.

Thus lost 9 million pounds ($14 million) in the year ending
March 31, compared with a profit of 11.6 million pounds a year
earlier. The company also said it will take a one-time charge of
43.5 million pounds for withdrawing the use of fixed-radio access
technology.

Profit before interest, taxes depreciation and amortization
fell to 14.3 million pounds from 26.6 million pounds. That was
less than the 18 million to 23 million pounds that analysts had
estimated. Sales rose 31 percent to 216.9 million pounds.

``Earnings were constrained as we stepped up infrastructure,
marketing and sales support activity ahead of future growth,''
Chief Executive William Allan said in a statement.
This is the first time Thus reported earnings after selling
1.1 billion pounds of shares to the public in November.
The Glasgow, Scotland-based company has three major revenue
streams: Internet and interactive services, including the Demon
Internet service provider; data and telecommunications service,
which connects businesses using fiber-optic networks and manages
data requirements for them, and call centers.
The call-center division is the smallest of the three.

Separately, the company said it will work with Microsoft
Corp., the worldwide leader in software for personal and business
computing and Dell Computer Corp, to jointly develop and sell
electronic-commerce systems to businesses.

Shares of the company rose 15 pence, or 4.1 percent, to
383.5p on Tuesday.


UNION PLC: Posts Pretax Loss of 3.14 Mln Stg
--------------------------------------------
Union PLC posted a pretax loss of 3.14 mln stg for the year to
Dec 31, compared with a loss of 1.43 mln in 1998.

The operating income was 12.34 mln stg, up from 8.64 mln the year
earlier.

The company recorded exceptional losses of 1.08 mln stg.
The basic loss per share was 3.3 pence, against a loss of 4.1
pence.

The company noted it "continues to deal with its past" and the
costs incurred in 1999 from the withdrawal from discontinued
operations amounted to 467,000 stg, against 263,000 in 1998.

The equity and bond fund management business lost 908,000 stg
before the write-off of goodwill of 243,000 stg in 1999.

Costs continue to exceed revenues as the company is making
"significant investment" in staff, Union said.

Turning to the year ahead, it said that its unit Union CAL is
currently "trading profitably" and is making a "welcome
contribution to group overheads".

It added that Union Discount remains a "small but sound business"
that is, however, unlikely to make a significant impact on the
group for some time -- however, the sale of 39 Cornhill will
"significantly reduce costs" and strengthen the company's balance
sheet.


VODAFONE AIRTOUCH: Faces o20bn Bill for Licences
------------------------------------------------
The Times   May 2, 2000

VODAFONE AIRTOUCH, the world's largest mobile phone company, is
facing a o20 billion bill to buy "next generation" mobile phone
licences throughout Europe.

The estimate, from a senior source close to the company, raises
the question of whether Europe's financial markets will be able
to cope with the funding demands of leading telecoms firms.

Concern over the cash needed to buy licences comes after Gordon
Brown, the Chancellor, raised nearly o23 billion by auctioning
licences in the UK last week. These licences give mobile phone
companies access to vast amounts of radio spectrum - the raw
material needed to provide mobile Internet and online shopping
and banking services.

Vodafone, left with o21.2 billion of net debt after its
acquisition of Germany's Mannesmann in February, has agreed to
pay nearly o6 billion for a UK licence. Today the German
Government is expected to name Vodafone as one of eight bidders
for one of its licences. This is expected to cost Vodafone a
further o8 billion.

The company is then expected to bid for licences in France, where
it owns a stake in SFR; The Netherlands, where it owns Libertel;
and Italy, where it owns a stake in Omnitel. It is also likely to
bid in the US through its joint venture with Bell Atlantic. Given
the vast sums raised by Mr Brown these countries are likely to
opt for auctions rather than the "beauty parades" organised in
Spain and Finland.

Nearly every large telecoms company in Europe, from British
Telecom to Deutsche Telekom, will therefore face vast funding
requirements for next generation licences. Most of them will hope
to raise cash through bond issues or by issuing new shares to
investors.

However, senior investment bankers fear the size and number of
fundraising exercises could trigger meltdown in telecoms markets.

"There is going to be a huge amount of capital-raising going on,"
said one analyst. "Governments have to bet on the fact that these
companies will be able to raise enough money to get European
licences. The market is not in the mood for telecoms stocks at
the moment."

Shares in Vodafone are currently at 294*p, compared with a high
of 399p in late February. This values the company at o181
billion. However, Vodafone is expected to receive a windfall of
about o30 billion when it sells Orange, the UK mobile phone
company it inherited when it acquired Mannesmann. Vodafone had to
sell Orange to gain regulatory approval for the deal. Vodafone
also generates huge amounts of cash. Its revenues for the year to
March are expected to be more than o16 billion.

A Vodafone spokesman admitted at the weekend that finding the
cash for licences would be a challenge. "It's anyone's guess
[what it will cost]," he said. "We will look at each market as
and when they come around."


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter Europe is a daily newsletter co-
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and Beard Group, Inc., Washington, DC.  Peter A. Chapman and
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Copyright 2000.  All rights reserved.  ISSN 1529-2754.

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