BAE and VT look to share spoils of Babcock takeover

BAE Systems will become the dominant player in British shipbuilding if it puts plans for a joint bid with VT Group for Babcock International into effect, industry sources said yesterday.

Babcock's interests would be split, with its shipyards going to BAE and VT snapping up its defence support services operations, they said.

City analysts are hoping to see an offer this week. The pair were forced to disclose their interest last week in the wake of a jump in Babcock's share price, which at one point hit a record high of 336p. Both BAE and VT said they were still considering the option of a bid but no decision had been taken. Babcock, which will issue a trading statement this week, declined to comment.

Industry sources said BAE was keen to take over Babcock's naval shipyard at Rosyth, Scotland, and its submarine refitting yard on the river Clyde.

BAE, which already has yards at Govan on the Clyde and Barrow-in-Furness in Cumbria, would then buy VT's Portsmouth yard, giving it control of most of the sector. Only DML, which runs the Devonport dockyard in Plymouth, would be left out of the consolidation.

Last year the Ministry of Defence said it was keen to see consolidation among Britain's fragmented dockyard industry.

Analysts believe it would make sense for VT to take over Babcock's support services activities, which make up four-fifths of its sales. However, analysts said that Babcock's shareholders would want to hang out for the highest possible price.

Bridgewell Securities suggested Babcock could be worth between 340p and 360p a share, valuing the company at between £708m and £750m. There was speculation over the weekend that Thales, the French defence group, Carlyle, the US private equity firm, and Serco, the UK support services companies, could launch counterbids.