GEC makes rival bid for VSEL

British Aerospace last night promised a prolonged fight against GEC's pounds 532m cash offer for VSEL, the Trident submarine builder, claiming the bid was anti-competitive and against the public interest.

BAe, which two weeks ago launched its own agreed pounds 478m offer for VSEL, said it would not allow itself to become embroiled in a price war with its rival, but believes it might be able to persuade the Government to block the deal. Dick Evans, BAe chief executive, said: 'We do not intend to make a move on price at all.'

The GEC offer of pounds 14 for each VSEL share was roundly attacked by the Labour Party as being anti-competitive.

GEC moved quickly to bolster its position by purchasing 13.7 per cent of VSEL, 5.2 million shares, through the market at the pounds 14 offer price.

The purchase, along with the one per cent of VSEL's shares owned by GEC pension funds, brings GEC near the 15 per cent ceiling it is allowed under VSEL's articles of association.

GEC's bid represents a 23 per cent premium to BAe's cash alternative of pounds 11.40 per VSEL share.

GEC said the Ministry of Defence had confirmed that it would not stand in the way of the bid, subject to certain undertakings and clearance from the competition authorities.

BAe insisted that GEC's offer was 'wholly inconsistent' with the MoD's policy in relation to defence procurement.

The bid was also attacked by Jack Cunningham, shadow secretary of state for Trade and Industry, who called for a House of Commons statement to be made on Monday. 'The GEC bid for VSEL, if successful, would create a private enterprise monopoly for warship building in England. The bid must be referred to the Monopolies and Mergers Commission,' he said.

It emerged yesterday that Sir Peter Levene, former head of procurement at the MoD, had tried to broker a joint bid for VSEL by GEC and British Aerospace last January. However, GEC backed away saying it was not interested. This made BAe think it would get a clear run if it bid by itself.

A successful takeover of VSEL would give GEC an impregnable position in surface vessels and submarines and seriously weaken BAe's attractions as a prime contractor for naval systems contracts.

GEC said that merging VSEL with GEC-Marconi Naval Systems, 'allows the UK's two principal warship suppliers to be brought together to create centres of design and manufacturing excellence for the construction of frigates, submarines and large ships for the Royal Navy and for export'.

David Newlands, GEC's finance director, said GEC- Marconi had been progressively building its capabilities in naval systems and believes that VSEL complements the Yarrow yard. Mr Newlands insisted that GEC wanted 'to do this for business reasons. It is another brick in the wall of our naval systems business.'

VSEL said it 'appreciated' GEC's higher offer but would make no recommendation to shareholders until the Government's attitude to the competition implications became clearer. VSEL has agreed to call an extraordinary meeting to change its articles of association to enable GEC to implement its offer. A similar meeting concerning the BAe offer is set for 9 November. One City analyst said that the bid by GEC is 'good and finely judged'. The offer will make little dent in the group's cash mountain. GEC is expected to generate cash of pounds 180m this year and VSEL has about pounds 290m net cash. VSEL's cash is seen as a key attraction for BAe, which at 30 September had net debt of pounds 91m.

View from City Road, page 15 (Photograph omitted)

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee