Page last updated at 11:21 GMT, Thursday, 18 February 2010

VT Group snubs new takeover offer

Devonport dockyard, the facility which maintains and refuels the Royal Navy's submarine fleet
Babcock International provides support to the Navy's submarine fleet

Support services firm VT Group says it has rejected an improved takeover approach from Babcock International.

Defence and engineering group Babcock's latest offer is worth £1.29bn, an increase on its previous £1.14bn bid made earlier in the week.

But VT Group said the new offer from Babcock "continued to significantly undervalue" the company and was "strategically unsound".

Both Babcock and VT are UK companies that supply the British armed forces.

For each VT share, Babcock is proposing to offer between 680 and 715 pence in cash, plus 0.701 new Babcock shares. VT Group said this was only a "small improvement" on the original bid approach.

VT Group maintains that a takeover by Babcock would be a "retrograde step", as VT is planning to reduce its exposure business from the UK's Ministry of Defence, which "could be susceptible to budget cutbacks following the election".

They also argue that the growth prospects of a larger group would be more limited and that such a deal would put strain on Babock's "already leveraged balance sheet".

Babcock has previously said it "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".

VT Group reiterated that it is currently pursuing its own acquisition strategy. It is trying to buy infrastructure firm Mouchel, which builds and operates road, rail and water networks.

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