VT accepts Babcock's 735p-a-share offer

23rd Mar 2010 07:03

Support services group Babcock is to take over rival VT Group after the two companies reached agreement on a tie-up after weeks of wrangling.The transaction will be worth about 735p for every VT share based on Babcock's latest closing price, comprising 361.6p in cash and 0.701 new Babcock shares, and values VT at about £1.33bn. The tie-up will create a FTSE 100-sized company, and will give Babcock extra exposure to the defence industry as well as access to other areas that VT has been moving towards, including school and road maintenance.VT rejected two previous takeover approaches from Babcock, the first valuing it at about 634p a share and the second at between 680p to 715p.VT, which last year sold its shipbuilding business to become a pure support services company, said it was trying to reduce exposure to defence sector to become more focused on support services. It said that, while the Ministry of Defence is likely to feel the impact of reduced government spending, support services will see increased demand as the government seeks to cut back on costs.However, Babcock argued that the merger would provide synergy benefits and create a company with enhanced capabilities. 'The acquisition of such a high quality and complementary business is in line with our strategy to be the leading engineering support services company in the UK,' said Babcock chairman Mike Turner today. 'We look forward to bringing the enhanced capabilities of the enlarged Babcock to new and existing customers.'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 from combining our two businesses.'