BAe snubs joint-bid offer from GEC

British Aerospace is understood to have spurned a proposal by GEC that the two companies make a joint takeover bid for VSEL, the builder of submarines.

Sources said the proposal was made last week during a meeting between Dick Evans, chief executive of British Aerospace, which recently launched its own agreed pounds 489.3m bid for VSEL, and Lord Weinstock, managing director of GEC.

The move has been interpreted in some industry quarters as a last-ditch attempt by GEC to avoid the acrimony that would most certainly ensue from a contested takeover fight.

Speculation mounted in the City towards the end of last week that Lord Weinstock, who has already disclosed his interest in owning VSEL, had started sounding out the Government as to whether it would block a counter-move by GEC.

A joint bid might lessen the Government's concerns about the anti-competitive implications of seeing GEC with complete control over Britain's warship-building yards. GEC already owns the Yarrow yard.

BAe, however, is said to be firmly against a joint bid because it believes that the competition issues would remain even if GEC assumed a management hands-off role in the venture.

Mr Evans said at the weekend: 'A GEC takeover would eliminate competition.

It would prevent the emergence of competition in naval- warship prime contracting in Britain.'

A joint venture would also give GEC greater access to knowledge about defence systems integration processes for considerably less money that it would have to pay if it went it alone and topped BAe's bid.

And a combined bid, it is understood, would scupper financial gains that BAe stands to make by sheltering tax losses within VSEL.

It has been estimated that the tax losses would see pounds 61m of profits from VSEL flow straight through to BAe's bottom line, significantly enhancing earnings per share. The acquisition would also strengthen BAe's balance sheet by around pounds 300m.

BAe's public thumping of the competetive drum, however, may not be heard in Whitehall. The Government has swiftly cleared BAe's path to taking over VSEL and has signalled to the European Commission to steer clear of what it clearly regards as a sovereign matter.

Defence analysts in the City are becoming more convinced that GEC, which has already requested and received confidential financial information on VSEL, will soon make a move.

Movements in the three companies' share prices over the past week increasingly point towards a contested battle. BAe's shares stand at 470p, valuing each VSEL share at pounds 12.91 on the terms of its 2.747- for-1 all paper offer. The shares trade at pounds 13.10.

Shares in GEC, which is sitting on a mountain of cash, eased towards the end of last week as the speculation about a counter-bid built up. The consensus among dealers in the City is that if GEC pounces it will do so with a knock-out cash bid above pounds 14 - perhaps as high as pounds 14.60.

At pounds 14 a share, VSEL would be valued in excess of pounds 530m against a current stock market worth of pounds 496.5m.

Meanwhile, it has emerged that an amendment was made to the service contract of Rob Holden, finance director of VSEL, the day before BAe made its bid. A clause was added giving him the right to compensation of two years' salary instead of one, should he leave if BAe's bid wins.

Lord Chalont, chairman of VSEL, defended the decision, saying that discussions to amend the contract were in hand beore BAe made its intentions known. Mr Holden, who is paid pounds 97,500 a year, was promoted from acting finance director to the full post in the summer, follwing the departure of Norman Broadhurst.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Beverley James: Transactions Manager

£30,000: Beverley James: A fantastic opportunity has arisen for a person looki...

Beverley James: Sales Ledger Clerk

£26,000: Beverley James: A fantastic opportunity has arisen for a person looki...

Anna Woodward: Invoicing Clerk

£21,500: Anna Woodward: The Accounts Payable team for this group is recruiting...

Ann: Senior Finance Analyst

£45,000: Ann: My client is a FTSE 250 retailer based in Central London and the...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower