Market braced for GEC to bid today

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The Independent Online
Shares in VSEL, the Trident submarine maker, moved ahead in late trading as rumours swept the City last night that Lord Weinstock's GEC would today trump British Aerospace's offer for the company.

With analysts increasingly confident of the industrial logic of a counter-bid - and the Takeover Panel pressing GEC to declare its intentions -VSEL shares rose 15p to 1,323p.

Lord Weinstock's acknowledged skill as a negotiator is to keep everyone guessing, though one analyst said last night: 'It makes sense for him to bid. He can easily afford to buy VSEL and the benefits are many.'

A bid could also be ruinous for GEC's arch-rival, BAe, which sees taking over a shipbuilder as an important part of its strategy to concentrate on defence interests. BAe is estimated to have spent about pounds 20m on advisory and preparatory fees in its pursuit of VSEL.

GEC shares finished 4p off at 270.5p, while BAe closed 6p higher at 473p valuing its all- share offer at 1,299p per share. BAe's pounds 478m bid is backed by a full underwritten cash alternative of 1,140p. GEC, sitting on a cash pile, could easily afford to top the bid, with analysts talking of a 1,350p a share offer.

GEC and BAe are both keen to win the pounds 2.5bn order for Trafalgar submarines being placed by the Ministry of Defence next year. VSEL is clear favourite to win the contract.

However, not everyone was confident that GEC had made up its mind to pounce.

One defence analyst said: 'A GEC bid would not have the blessing of the MoD, so why would Weinstock bother? Saying he is a potential bidder is another classic case of Weinstock upsetting the apple cart to gain a little advantage.'

GEC already owns the Yarrow shipyard on the Clyde, and is interested in bidding for Plymouth's Devonport dockyard. Bids for the yard close on Monday. VSEL intends to mount a joint bid for the yard with Devonport's management, and yesterday BAe confirmed that it would continue with the tender if its VSEL takeover succeeded. Devonport is to refit all the nuclear submarines that VSEL makes.

Meanwhile, BAe yesterday made an important breakthrough in its bid to win a pounds 1.5bn order to replace the US military's Sidewinder missile. The Pentagon has agreed to begin testing BAe's Advanced Short-Range Air-to-Air Missile after intense lobbying by the British company, which opened a special project office in Washington to brief senior military and political officials.

An order for an undisclosed number of ASRAAMs was placed by the UK Ministry of Defence in 1992. But substantial exports are vital for the future of BAe's Dynamics Division at Stevenage. 'The Pentagon decision to test and evaluate ASRAAM is an important step forward for us,' a BAe spokesman said.

But the company will face stiff competition from both Loral and Raytheon, which builds the Sidewinder.

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