British Aerospace close to VSEL deal

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The Independent Online
BRITISH Aerospace is edging close to an agreed purchase of VSEL, the Trident submarine builder, though sources close to the company say a deal is 'possible but not likely' this week.

The companies have agreed a takeover in principle but have been negotiating hard on price. BAe has been unwilling to pay much more than pounds 12 a share, valuing the company at pounds 455m, while VSEL is understood to want nearer pounds 13.50 a share, giving it a pounds 511m market valuation. 'They are haggling over the price, but they are coming together,' the source said.

BAe acknowledged last week that it was the bidder for VSEL, following an announcement by the Barrow company that it was in talks. Analysts believe the shipbuilder's main attraction is its pounds 324m cash pile, although shipbuilding experts say there could be commercial logic as well. The purchase would enable BAe to bid for naval orders as a prime contractor, rather than a secondary supplier, while BAe's financial muscle could make it easier for VSEL to win orders.

Because of VSEL's strategic position, any bid has to be approved by the Ministry of Defence. The MoD holds a golden share which can prevent any single investor owning more than 15 per cent of the shares.

It is understood that GEC, which had been expected by the industry to pitch for VSEL, has not made any approach.