VT Group agrees to £1.3bn Babcock deal

DEFENCE services company VT Group yesterday succumbed to takeover interest from rival Babcock after agreeing a deal valuing the firm at £1.3 billion.

The former Vosper Thornycroft business had previously resisted Babcock's approaches, but said the recommended cash-and-shares offer was "fair and reasonable".

VT chairman Mike Jeffries said: "The VT board believes that Babcock's offer represents an attractive proposition for VT shareholders, both through the immediate offer premium and through the opportunity to benefit from the synergies available."

Babcock, which employs about 17,000 people and generated revenues of almost 2bn last year, made two offers in February of 1.1bn and 1.2bn, but was accused by VT of significantly undervaluing the business.

VT – which employs 10,000 staff and counts the BBC World Service, the Metropolitan Police and the Royal Navy among its clients – also previously warned of Babcock's exposure to Ministry of Defence spending, which it said could be susceptible to budget cutbacks following the election.

But yesterday VT accepted the revised bid and said directors would unanimously recommend that shareholders vote in favour of the deal, which could be completed by the end of July.

VT shareholders will own about 36 per cent of the combined group if the deal gains approval. Babcock said the combined business would have revenues of about 3bn and an order book of about 10bn.

And it said the enlarged group would have a broader range of expertise and would result in merger benefits of around 50 million a year, with additional annual financial efficiencies of 8m.

Particular opportunities are seen in the UK air, land and sea defence markets, while the firm said the merged group would have a strong nuclear business with about 3,000 employees servicing defence and civil nuclear sectors.