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Racal Electronics Ltd.

Racal, one of the biggest industrial success stories of the post-war years. was founded in 1950 by Ray Brown and Calder Cunningham, who named by joining the first three letters of their names. Their first product was a radio receiver. Within a decade the Racal Group had been outstandingly successful in the export trade with countries in all parts of the world. Shares in the electronics group Racal rose more than 7,000 per cent. between 1965 and 1982 when it was one of the market's star performers.

In 1966 Raymond Brown, O.B.E., joint founder and Managing Director of the Racal Electronics Group, resigned his appointment as Chairman and Managing Director of Racal Electronics and ceased to take any part in the business of the company. In his new post as Head of Defence Sales, he had no contractual relationship with Racal, but occasions may arise in the course of export promotion when he may have to deal with matters affecting the interests of Racal as well as other firms. In such cases, it would be inappropriate for decisions to be made by him, and they will, therefore, be referred to the appropriate Permanent Secretary or his representative. The appointment was for two years at a salary of 8,000 a year. The Head of Defence Sales was responsible for the control of those Ministry of Defence and Ministry of Aviation staffs at home and overseas responsible for military sales and military exports promotion. In addition he had a small number of supporting staff including a Military Deputy. The unit became known as the Defence Sales Organisation and kept the name until 1985 when, with the completion of arms industry privatization, it was changed to the Defence Export Services Organisation. This was, apparently, a "more accurate reflection of its revised function".

In 1984 the takeover of Decca by Racal included agreements in relation to that business effort to look after the patent rights, the intellectual property rights, as a totally separate matter from factories and machinery and property rights. Intellectual property rights in the deal were considered to be one of the fundamental assets which were carefully looked after in relation to the goodwill of Decca which was preserved by Racal.

The Racal-Decca navigator system was an important marine navigational aid in the waters around the British Isles. It provides highly accurate position-fixing signals that could be picked up by purpose-built receivers. For well over 30 years Racal-Decca (and the Decca Company before it) recovered the cost of this service from the rentals of receivers. By the mid-1980s, however, advances in technology made it feasible for other manufacturers to sell relatively low-cost receivers, so eroding Racal-Decca's rental revenue. Racal-Decca decided in 1986 that this loss would quite shortly make it impossible for it to continue to provide the service on the previous basis. After extensive discussions with the Ministry of Transport it was agreed in principle that the company would be prepared to continue to run UK transmitters to the same high technical standard as hitherto under the superintendence of the General Lighthouse Authorities and as a charge to the General Lighthouse Fund.

In the summer of 1986, the British Government opened a competition for a system to fulfill its early warning needs. Seven companies submitted bids to the Ministry of Defence: Boeing (AWACS), Grumman (E-2 Hawkeye and Nimrod fitted with U.S. avionics), Lockheed (P-3 Orion), Airship Industries, Pilatus Britten-Norman, MEL (a subsidiary of Philips Electronics), and GEC Avionics (Nimrod AEW.3). It isimportant to note that had the British been successful in developing their own early warning system, the Nimrod AEW.3, the radar for which has been under development at GEC since 1977, there probably never would have been any competition at all.

In November, 1986 Boeing upped the offset offer to 130 percent of the contract value over eight years if AWACS were selected. This figure is the highest ever made by Boeing in an international competition. By this time, Boeing had already negotiated participation agreements with three British avionics companies--Plessey, Ferranti, and Racal--and these firms publicly supported AWACS over the Nimrod. In December 1986, the Ministry of Defence announced selection of the Boeing AWACS.

When huge quantities of disposable income were shifted out of the UK into OPEC countries between July 1973 and early 1986, when oil prices fell from $35 a barrel to $8 a barrel massive gains could he made by selling, for instance, tactical radios to armies in the Gulf states. Companies in that line did extremely well during that brief period and made 7,000 percent gains. They stood still during the next two and a half years, as all the income that went to the Arab countries suddenly sloshed back into western countries when the price of oil dropped to roughly half what it was in early 1986. Racal was the supreme example of the gainers from the OPEC price rise.

As the company grew it bought up a number of manufactures, merging with Tacticom in 1990 to become Racal Radio. The Secretary for State for Trade and Industry announced on 20 November 1991 that the proposed acquisition by Williams Holdings plc of Racal Electronics plc will be referred to the Monopolies and Mergers Commission unless suitable undertakings are offered by Williams to remedy the expected adverse effects of the proposed acquisition. The Secretary of State announced on 4 December that he had accepted signed undertakings from Williams Holdings plc requiring the divestment of Racal Electronics plc's lock and safe businesses in the United Kingdom within 15 months should Williams gain control of Racal.

Racal bought the telecoms business from British Rail for 135 million pounds in 1995. On 1 January 1997, some telecommunications assets were transferred to Racal Telecom as part of an agreement under which Racal undertook to provide telecommunication services under agreed terms for a period of 10 years.

The company carried on into 1998 when it merged with Racal Radar Defence Systems and was then known as Racal Defence Systems. In 1999 Racal sold its telecommonunications segment to Energis for 750 million pounds, in the final break-up of the group. The sale of the telecoms business was followed by the auctioning off of Racal's two other businesses - defence and industrial electronics. Racal's defence electronics arm, which specialized in electronic warfare radar and command information systems, was acquired by Thomson CSF [now Thales].



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Page last modified: 14-05-2013 19:27:07 ZULU