Less than two weeks before the Monopolies and Mergers Commission is expected to rule on the competing bids, BAe yesterday unveiled a £383m cash call and issue of warrants.
Last year BAe raised £178m as part of a two-stage £535m rights issue. The second stage was cancelled when the bids for the Trident submarine maker were referred to the MMC and the offers lapsed.
Dick Evans, BAe's chief executive, said: ``Without pre-empting the outcome of the MMC investigation, we have decided to pre-finance the cash element of any offer that we may make for VSEL."
But one analyst said: "The market will inevitably start thinking they know something about the MMC outcome that we don't. The shares held up well, but then BAe has had a lot of support lately.''
The MMC is expected to report its conclusions to Michael Heseltine, President of the Board of Trade, by 12 April. Both companies were expected to be cleared to renew their bids, and the outcome will stamp its mark on the future of UK defence procurement policy.
The rights will not go through if BAe's bid is blocked. "In that sense this is more a facility than a rights issue,'' a spokesman said. He said BAe acted now because a GEC bid is likely to be all-cash "and we did not want to be in the position of having to mount a fund-raising exercise after 12 April''.
A renewed BAe bid for VSEL will be via a share offer, with a cash alternative, the company said. The rights issue announced yesterday will be in two parts, the first raising about £94m. This will be repaid if, as part of a renewed bid, the cash element is higher than the £170m already raised. A second instalment will be called if the cash element exceeds £264m.
The issue will be equivalent to a one-for-five rights issue at 430p to raise up to £383m, and a one-for-25 issue of warrants. Each warrant will carry the right to subscribe for one new BAe ordinary share at 550p a share on 15 November 1996 and on 15 May and 15 November in each of the years 1997 to 2000.
Paul Bickford, of Panmure Gordon, said: "It seems like a sensible issue. BAe will be well positioned if they're allowed to bid for VSEL.'' However, Zafar Khan, at SG Strauss Turnbull, questioned last year's decision to cancel the second instalment. ``That was not clever because of the extra costs of reviving the issue now," he said.
VSEL, at Barrow-in-Furness, recommended BAe's offer before GEC entered the fray with a £14 a share cash bid. BAe's revised bid was worth £15 a share, but because of VSEL pivotal role in the defence industry the matter went to the MMC.
Comment, page 41