BAe to get go-ahead for VSEL

BY RUSSELL HOTTEN

British Aerospace's planned takeover of VSEL has received the all-clear, but Michael Heseltine, President of the Board of Trade, is considering imposing conditions on a rival bid from GEC.

VSEL shares rose 28p to close yesterday at 1,638p as dealers anticipated imminent publication of a Monopolies and Mergers Commission report into a takeover that would re-shape the British defence industry. The report, awaiting Mr Heseltine's approval and amendments, sees no competition or public interest problems with BAe re-launching its £573m-plus bid.

However, according to sources involved in the MMC investigation, there was strong concern that GEC's takeover of the Trident submarine maker would significantly reduce competition in the defence market.

The MMC has urged Mr Heseltine to secure binding guarantees from GEC that it would keep open its Yarrow shipyard on the Clyde if it took control of VSEL's facilities at Barrow-in-Furness.

The source said he had been led to believe that Mr Heseltine planned to publish the MCC report early next week. "BAe is clear. GEC may find a hurdle or two," he said. "The reason the MMC needed an extension was because they were unsure what to do about GEC."

A defence analyst who knows BAe and GEC well said: "It's my understanding the report may be published before next week. The market expects both to be cleared and for BAe to have the upper hand."

BAe has already put its rights issue in place so it can re-launch its bid, which lapsed along with GEC's, immediately. BAe is holding a two- part £383m cash call, which effectively re-instates the second part of last year's rights issue. GEC has an estimated £2bn cash pile to draw on.

BAe's bid had been recommended by the VSEL board until GEC entered the fray.

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