Babcock and VT begin talks

4th Mar 2010 14:43

Babcock International and VT Group have begun talks about the creation of a defence-oriented support services business despite VT's previous opposition to a merger.Babcock said today that the two companies 'have agreed a basis for a mutual exchange of information.'The announcement came a few hours after VT Group said it would not be making an offer for its rival Mouchel after seeing two bid approaches rejected.VT said it 'has decided not to make an offer for Mouchel at this point,' in view of Mouchel's rejection of its bid and VT itself receiving a bid from infrastructure group Babcock International.VT, the support services group, last month raised its proposed offer for contractor Mouchel by about 15% to 294p per share but the offer was rejected.Soon after this VT Group rejected a second takeover proposal from rival Babcock International.VT said it continues to believe in the rationale of a tie-up with Mouchel.'An acquisition would be firmly aligned with the successful strategy VT has pursued over the last five years of developing a broader based support services business, would result in cost synergies that naturally result from a combination of two businesses of the scale of VT and Mouchel and would be significantly earnings enhancing,' it said.VT Group, which last year exited its shipbuilding business to become a pure support services company, has previously said that an acquisition of Mouchel would help it increase its exposure to outsourced government contracts in areas such as road management. In contrast, it says a tie-up with Babcock would be a retrograde step because it would increase its exposure to the defence sector, which is vulnerable to government cuts.