Decision due on VSEL bids

BY RUSSELL HOTTEN

The takeover battle for Britain's biggest naval yard is due to recommence this week with the Department of Trade and Industry expected to clear the bid for VSEL by British Aerospace and GEC.

A Monopolies and Mergers Commission report on the bids could be published as early as today, and speculation was growing over the weekend that BAe will get the upper hand. Analysts believed BAe would be cleared unconditionally, while GEC may be forced to provide binding guarantees that it will keep open VSEL's Barrow yard and its own Yarrow,Clyde, facility.

The outcome of the takeover will re-shape the UK naval defence industry, and the bids were referred to the MMC last year partly because of monopoly fears if GEC took control of VSEL, which makes Trident nuclear submarines.

Michael Heseltine, President of the Board of Trade, goes on a trade mission to China on Friday, and he was expected to publish the MMC report before then. BAe has cancelled a press visit to its facilities scheduled for today and tomorrow, suggesting it may be aware of the imminent publication of the report.

Neither BAe nor GEC was expected to re-launch bids immediately after publication. One aerospace analyst said: "It makes sense to consider and reflect upon what the MMC has to say. If conditions are put on GEC, then BAe can re-think its price strategy."

Last October GEC topped BAe's £11.40 recommended offer for VSEL with a £532m cash bid worth £14 a share. At the same time GEC snapped up 13.7 per cent of VSEL. BAe came back with a £14-a-share cash bid plus a higher all-share offer.

Takeover Panel rules mean that GEC, because it has already bought shares in the market at £14 each, could not now lower the value of its offer. BAe, however, could revise down its offer if it felt any conditions imposed on GEC made a bid from Lord Weinstock's company unlikely.

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