A joint venture has been agreed between naval warship giants VT Group and BAE Systems in a move which will secure thousands of UK shipbuilding jobs.
Called BVT Surface Fleet Limited (BVT), the venture will sign a 15 year partnering deal with the UK Ministry of Defence (MoD) to design, build and supply military surface vessels and aircraft carriers with through-life support. BVT will employ 7,000 staff across operation bases in Bristol, Glasgow and Portsmouth.
After announcing the initial proposals for the move in July last year, the deal was finally signed today. The new firm will be 55 per cent owned by BAE and 45 per cent by VT. The two firms will have equal board representation and voting rights at BVT.
BAE chief executive Mike Turner said: “The formation of BVT Surface Fleet creates a global leader in the provision of naval ships and through-life support giving armed forces world-wide significantly enhanced capability. The joint venture will help secure the long term sustainability of the UK naval sector and the thousands of jobs it supports.”
The final tick-box for the deal is the approval of VT shareholders, who will meet at an Extraordinary General Meeting at the end of June, ready for operations to commence on July 1. Work on the two new Royal Navy aircraft carriers, named Queen Elizabeth and Prince of Wales, is expected to begin shortly after. Each vessel can carry 40 military planes. BVT will be awarded the majority of the £3.9 billion contract for the ships.
In addition, VT will purchase from BAE the remaining 50 per cent of Flagship Training Limited for £65 million. It already owns the other half. The price is set to fluctuate by £10 million either way, based on the performance of the company.
“Placing our shipbuilding and naval support in a large joint venture is a major strategic move that will allow us to focus more time on growing our engineering-based support services businesses,” said Paul Lester, chief executive of VT.
“Securing full ownership of Flagship Training is another important step in this process as we become a major support services organisation,” he added.
VT has a call-option clause with a minimum exit cost on their stake of £380 million. It said it will decide its future involvement on the basis of the contracts awarded to BVT.