Archive for the ‘Vertical: Shipping’ Category

Babcock International Rejects Purchase of VT

Monday, February 15th, 2010


Although this bid was rejected, shipping and submarine M&A is certainly heating up.  VT group was offered 634 pence to be bought out.  As much as thirty percent of Babcock’s business overlaps with VT.  Talk about synergy potential…~I.S.

Babcock International Group Plc, which maintains Britain’s submarine fleet, offered 1.14 billion pounds ($1.7 billion) for VT Group Plc, a move that may prevent the smaller defense company combining with a rival.

VT Group rose the most since at least 1991 after Babcock disclosed its approach for the company, rising as much as 92 pence, or 18 percent, to 600 pence. Babcock bid the equivalent of 633.9 pence in cash and stock for each share of VT Group, or 25 percent more than VT’s closing price yesterday, it said.

Babcock and VT Group both work in technical engineering in markets that include defense and nuclear power. Babock’s bid for VT Group, the third approach since last year, coincided with VT’s proposal to buy Mouchel Group Plc, the U.K. maintenance company, which had rejected two previous VT overtures as “wholly inadequate.”

“About 30 percent of Babcock’s business overlaps with VT,” said Mike Allen, an analyst at Panmure Gordon U.K. Ltd., who recommends investors buy Babcock shares.

Babcock said it could save about 27 million pounds each year through a combination with VT Group. Babcock approached VT’s board on Feb. 3 with a letter laying out its purchase plans, after two unsuccessful attempts last year.

Industrial Logic

“Babcock considers that a combination with VT has significant industrial and commercial logic and would bring together two highly complementary businesses to create a large and focused international engineering support services company,” the company said in the release.

VT Group increased its offer for Mouchel earlier today. The latest offer is worth 294 pence for each share, based on VT’s Feb. 12 closing price of 508 pence, Mouchel said today. The company’s board is considering the new offer and will consult with shareholders, it said.

The Babcock offer “is totally unacceptable both in its constitution or value and the rationale behind it,” VT Group spokesman Philip Rood said in a statement. “We believe that Babcock is strategically challenged because they are heavily exposed to the future expense budget that will be clearly be cut under the new administration.”

For more information, please visit Bloomberg…