In its new bid, Babcock would have offered 27 to 33 per cent more for each share of VT Group. The share price was 537.5 pence at the close of business on 2 February, the day before Babcock’s approach.
The VT Group board claimed the transaction would have been a ‘retrograde’ step for the company and increase its reliance on MoD contracts, which will likely be reduced again with ongoing budget cuts.
The support services firm is looking more towards outsourced procurement activities, which would be a conflict of interest for Babcock as it is a contractor to the MoD in the marine and defence estates.
In statements following the rejected bid, VT Group noted the transaction would also have put further strain on Babcock’s already leveraged balance sheet, which also remains exposed to pension liabilities of more than £2bn and a current net deficit of £287m.
VT Group is undergoing somewhat of a company makeover — re-identifying itself as a business less reliant on the defence sector. The company has openly expressed its interest in the takeover of infrastructure firm Mouchel, which operates road, rail and water networks.
Phil Rood, spokesman for VT Group, said the acquisition of Mouchel will help the company ‘extend its footprint’ into other sectors.
Currently, he said, the MoD is by far VT Group’s largest single customer, supplying 40 per cent of its business. An additional 20 per cent is derived from US Department of Defense contracts.
Rood said VT Group would like to shrink its reliance on the defence sector to 35 per cent.
He added: ‘We believe in the future there will be continuing pressures on the defence budget and therefore we want to be less vulnerable to that volatile situation.’
Oxa launches autonomous Ford E-Transit for van and minibus modes
I'd like to know where these are operating in the UK. The report is notably light on this. I wonder why?