Babcock International has asked investors for £1.1 billion to fund the purchase of Westminster-based helicopters group Avincis - a deal 15 months in the making.
Babcock chief executive Peter Rogers told the Evening Standard that over the past three days he had gained the backing of 11 of the group’s top 14 shareholders — who together hold more than a third of the company’s stock — for the rights issue.
The acquisition — which suggests bosses’ appetite for deals is on the rise — is not without controversy, however, as Avincis owns Bond Offshore helicopters. In December, a Bond craft crashed into a Glasgow pub, killing nine people.
Rogers claimed that the purchase cemented Babcock’s reputation as one of the City’s hungriest groups for major acquisitions. Most famously, Babcock splashed out £1.3 billion on rival VT Group in 2010. He said: “We’re used to doing large deals. We’ve seen 11 of our top shareholders and they’ve all said that they will vote ‘yes’ for the deal.”
However, shares in the FTSE 100 company fell 64p, or 4.7%, to 1302p.
Once debt is included, private equity-owned Avincis will cost Babcock nearly £1.64 billion. The group flies what are described as “mission-critical services”, such as air ambulances and police choppers, in 10 countries from Norway to Australia.
Babcock’s advisers on the rights issue will pick up fees totalling £45 million. The bulk of these will go to lead underwriters JP Morgan Cazenove, Jefferies, Barclays and HSBC.
Babcock’s total fees come in at 4% of the money it is raising, compared with insurer RSA’s 3.2% in fees for its £773 million rights issue earlier this week. That issue was underwritten by JP Morgan Cazenove and Bank of America Merrill Lynch.
Babcock owns the Rosyth dockyard, on the Firth of Forth near Edinburgh, where the Royal Navy’s aircraft carriers are assembled, and the government will have been relieved to see that the company has outlined the risks of Scottish independence as part of today’s rights issue prospectus.
There had been industry speculation that Rogers could be tempted by the opportunity to become the new state’s premier defence contractor.
However, the prospectus says: “If Scotland becomes independent, there is likely to be a lengthy period of un-certainty in respect of the new Scottish government’s policies and their impact (some of which can be adverse) on the Babcock group’s… Scottish businesses.
“There may also be a medium-term knock-on effect on the nature, timing and scope of the policies and procurement plans of the successor British state, especially in defence terms.”