Thomson Signs A Strategic Partnership With TCL

24-Nov-03

Thomson (Euronext Paris: 18453, NYSE: TMS), worldwide leader in end-to-end solutions (technology, equipment, services) for the entertainment industries, announced the signature of a binding MOU with TCL International Holdings Limited (""TCL International,"" HKSE: 1070), the leading multimedia consumer electronic products company in China, to form TCL-Thomson Electronics, a new company for the development, manufacturing and distribution of television sets and DVD players. Thomson announced in 2003 a strategy of partnership for the ""mainstream"" part of its Consumer Products Division, covering the group's TV and home video player activities. The goal was to secure a strong and profitable future for its consumer electronics assets, by creating economies of scale in ""mainstream"" and valorizing its brands, marketing and sales force and related added-value skills. This announcement achieves this strategic goal. Completion of the partnership is also expected to yield positive financial benefits for Thomson and change the group's financial profile.Separate from this partnership, Thomson intends to take advantage of its increasing presence in China to expand opportunities from the fast-growing Chinese market for its Components, Licensing and Content & Network Divisions.Scope Of The AgreementThe agreement envisages that Thomson and TCL combine their TV and DVD businesses and assets to form a new company--TCL-Thomson Electronics. The new company would benefit from competitive advantages built around (1) leading but complementary market shares in its three major markets of Asia, Europe and the U.S., (2) strong brands in these markets (Thomson in Europe, RCA in the U.S., and TCL in China), (3) a cost-efficient industrial presence near each consumer market, (4) strong technological capabilities with close to 1,000 engineers, and (5) a complete product and service offering for its customers. TCL and Thomson expect the new company to have a profitable future built on the potential to achieve revenue and operational synergies driven by scale effect and global presence. The agreement covers substantially all of the ""mainstream"" activity of Thomson's Consumer Product division, notably the manufacturing and sale of TV sets and DVD players. This activity has accounted for just over 20 percent of the group's revenues in the year to date (and was 57 percent of the Consumer Products Division revenues in the third quarter of 2003).Thomson would contribute all its television manufacturing plants and businesses in Mexico, Poland and Thailand, all the DVD player business, and all television and DVD player R&D centers worldwide. Thomson would take key management positions in the new company, which would be joined by the approximately 9,000 current Thomson employees involved in its TV and DVD player businesses. Thomson would hold a 33 percent share in the new company Thomson would retain ownership of its brands, IP, marketing and sales organization and certain value-added manufacturing assets. No net working capital related to the TV and DVD player activities would be contributed, as the new company is intended to finance its own working capital and investment needs. Thomson retains full control of the ""essentials"" business (mainly personal audio/video, communication products and accessories) of its Consumer Products Division. This largely service-based activity accounts for around 43 percent of the Consumer Products Division revenues in the third quarter of 2003 and is clearly profitable.Thomson would be a preferred supplier to the new company of products and services. In particular, Thomson's sales and marketing network would become the exclusive agent to the new company for distribution into North America and Europe, and provide added-value services such as product design, client coverage, logistics, quality and certification and after-sales services and some value-added build-to-order manufacturing. Thomson's Component division is to be a preferred supplier of tubes and other components to TCL-Thomson in China and worldwide. Thomson would license its leading consumer brands, RCA and Thomson, and the two companies would cooperate in intellectual property development and management. Completion Of A Key Strategic Goal This agreement completes the strategy begun in 2001 to position Thomson as the leading end-to-end solutions provider (technologies, equipment and services) to the entertainment industries. Adjusted for the completion of the transaction base, around 51 percent of Thomson's current revenues would be derived from its Content & Network division, around 20 percent from Components, around 23 percent from Consumer Products Services, and around 6 percent from Licensing, a fundamental shift relative to Thomson's business before the current strategy was put in place. As well as securing a strong and profitable future in consumer product services for the benefit of its retailer clients, Thomson also maintains a direct link with end-consumers, an important source of innovation and technology development. The transaction remains subject to finalization of definitive agreements, as well as regulatory and similar approvals. Final closure is expected mid-2004. ""Thomson's business and prospects are transformed by this agreement,"" said Charles Dehelly, CEO of Thomson. ""In the last three years, we have built strong and sound positions in each of the businesses we have chosen to focus on yet maintaining a strong relationship with end consumers. We have considerably strengthened the group's industrial and financial profile, and opened significant worldwide growth opportunities, in particular in China and in our Content and Network division. Today's agreement completes this positioning phase, leaving Thomson poised for sustainable and profitable growth in the coming years."" For more information about Thomson, visit www.thomson.net.

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