VT rejects Babcock takeover

Posted on 15 Feb 2010 by The Manufacturer

Defence and engineering group Babcock International announced that it has made a takeover approach for rival VT Group, which has been rejected.

Babcock International Group Plc, which maintains Britain’s submarine fleet, said its offer to buy VT Group Plc for approximately £1.14bn was rejected by the UK defence services company. Babcock bid the equivalent of 633.9 pence in cash and stock for each share of VT Group — 25% more than VT’s closing price yesterday, according to a press release. Babcock said it approached VT’s board on 3 February with a letter laying out its purchase plans, after two approaches last year.

In its statement, Babcock said: “It is disappointing that VT’s Board has declined to discuss this further with Babcock or to engage with a view to exploring terms which might be acceptable to them. Babcock believes it is in the interests of both companies’ shareholders for Babcock and VT to work together towards an agreed transaction for the mutual benefit of all stakeholders.

“Babcock has identified significant merger benefits (excluding any growth synergies), quantified at approximately £27m per annum pre-tax. Substantially, all of the benefits are anticipated to be achieved by the end of the first full year following completion of the proposed acquisition. In addition, a further benefit of approximately £6m per annum is estimated to come from a reduction in the effective corporation tax rate of the combined group post acquisition.”

News of Babcock’s bid came on the same day that VT Group raised its offer for Mouchel, the support services group, by 18%, valuing Mouchel’s total equity at approximately £320m.

“This is our final offer,” said Paul Lester, chief executive of VT. “I think we have a reasonably good confidence that we hope Mouchel will accept it and that means we can go into due diligence and then put a formal offer to the market.”